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The impact of China’s Delta outbreak is starting to show up in the high frequency activity data. (See Chart 1.) The jolt is still smaller than January’s but it will get bigger since restrictions on movement are still being tightened. Chart 1: Passenger …
6th August 2021
Economy struggling to gain further ground The latest surveys suggest that the pace of growth slowed more than expected last month. Supply bottlenecks remain a constraint. But the PMIs suggest demand is cooling too, taking the heat out of price gains and …
2nd August 2021
China’s impressive record of staunching COVID-19 outbreaks is being tested by the Delta variant . The flare-up that was first identified in Nanjing last week has now spread to 15 other cities, making it the most geographically dispersed since the initial …
30th July 2021
Recovery took a leg down in Q2 due to export decline Hong Kong’s economy contracted last quarter as exports moderated after an exceptional Q1. The path of output is likely to remain subdued until Hong Kong’s borders reopen. After soaring 5.4% q/q in Q1, …
Questions about the strength of China’s post-lockdown rebound have become louder since the People’s Bank cut the required reserve ratio three weeks ago. But the trigger for this week’s sharp equity market sell-off was instead growing disquiet about the …
The slowdown that we anticipate in China over the next 6-12 months is best viewed as a return to normality following a period of above-trend output. While it will be a headwind to growth in some industrial commodity producers, we do not think it will …
23rd July 2021
Overview – China’s economy has been defying gravity thanks to elevated global demand but this support may now be fading. Meanwhile, last year’s policy easing has been fully reversed. An abrupt slowdown is not likely to follow, but highly-indebted firms, …
From bad to worse Evergrande is being pummelled again. Over the weekend it came to light that one of the developer’s deposit accounts had been frozen by court order in a dispute with Guangfa Bank. Then on Monday, Shaoyang city authorities revealed they …
Our China Activity Proxy (CAP) suggests that growth accelerated in q/q terms last quarter but that output edged down in June on the back of softer industrial and construction activity. We think China’s COVID-19 rebound has reached its limits and that …
22nd July 2021
This Focus has been updated to incorporate the latest publicly-available information on China’s eCNY project, including the PBOC White Paper published on 16 th July 2021. The original version of the Focus , published on 27 th May 2021, is here . In this …
21st July 2021
Cyclically healthy, structurally ailing China’s post-lockdown recovery has often been called patchy, with household spending still weak. We’ve never been entirely comfortable with that characterisation. Retail spending on goods has been back near the …
16th July 2021
Better than Q1 but growth still subdued China’s GDP growth dropped back in y/y terms last quarter as the base for comparison became less flattering. In q/q terms, output rose at a slightly faster pace than in Q1, when a flare-up in virus cases weighed on …
15th July 2021
Current strength is not sustainable Headline trade growth was stronger than expected last month, partly thanks to an increased supply of semiconductors. But exports remained below their recent peak and we still think shipments will soften in the coming …
13th July 2021
Tech crackdown goes to New York… Decoupling has entered a new phase over the past year. Where China previously was trying to temper US efforts to decouple, in key areas it now appears to want the same. The Five-Year Plan’s push for self-sufficiency in …
9th July 2021
The People’s Bank (PBOC) has just announced a 50 basis point cut to the required reserve ratio (RRR) for most banks. This is less of a lurch towards monetary easing than it might seem at first glance – it is partly intended to offset tightening elsewhere. …
Credit growth flattens Credit growth levelled off in June having previously decelerated to the pre-pandemic pace. We suspect this is a pause rather than an end to the slowdown – today’s RRR cut notwithstanding. Either way, the deceleration over the first …
Price pressures start to ease After reaching a 12-year high in May, producer price inflation dropped back in June as the rally in global commodity prices faltered. Consumer price inflation declined too, on the back of a sharp drop in pork prices. We think …
Xi sounding antagonistic China’s Communist Party, much like Britain’s monarch, has an official birthday (1 st July) that is different from its actual date of birth (23 rd July 1921). The centrepiece of yesterday’s official centenary was a forthright …
2nd July 2021
More evidence of a slowdown The Caixin manufacturing index published today dropped back last month and adds to signs from the official PMI released yesterday that momentum in industry is waning. The surveys point to a levelling off in demand and easing of …
1st July 2021
Some believe that China is adding to global inflationary pressure. The opposite is closer to the truth: the large increase in China’s trade surplus over the past year signals that supply from China has risen far more than demand. Global consumer goods …
30th June 2021
Growth slowing, price pressures easing The latest surveys suggest that growth softened this month. A slower improvement in services activity was mostly to blame. But supply shortages also continued to hold back output in the manufacturing sector. On a …
China’s export boom may have peaked A surge in demand for Chinese goods has stretched global shipping capacity, leading to bottlenecks at Chinese ports and a jump in container freight rates. A flare-up in COVID-19 cases in southern China earlier this …
25th June 2021
Revisions to the historic data following the recent census show that China’s population barely grew last year and that employment is already contracting faster than previously understood, having peaked in 2014 rather than 2017. The silver-lining, however, …
24th June 2021
Our China Activity Proxy (CAP) suggests that output remained strong in May but didn’t rise much further, with slowing credit growth weighing on construction and China’s pandemic-induced export boom showing signs of peaking. We think output will, at best, …
23rd June 2021
Commercial banks left the Loan Prime Rate (LPR) on hold again today. The PBOC has now fully reversed last year’s credit acceleration using quantitative controls. Accordingly, policy rate hikes that could prompt LPR increases are unlikely in the near …
21st June 2021
Producer prices may have peaked Factory-gate inflation hit a 12-year high of 9% y/y last month but there are signs that price pressures are now easing again. Weekly figures suggest that producer prices have dropped back from a late-May peak by the most …
18th June 2021
By September, China could be in a position to export 340mn vaccines doses each month – more than most regions of the world have administered in total so far. China’s vaccines are less effective than others, but have been found to suppress outbreaks where …
17th June 2021
Consumption a bright spot as momentum elsewhere falters Headline growth on all the key indicators dropped back last month. But after adjusting for base effects the picture was more mixed, with investment slowing, industrial output growth holding steady …
16th June 2021
US takes a leaf out of China’s policy playbook The big news this week was that the passage of the US Innovation and Competition Act (USICA) by the Senate. The bill earmarks $190bn in federal funding over the coming five years (albeit not all of it new) …
11th June 2021
Credit growth takes another leg down Broad credit growth continued to slide in May and is now at its slowest since February last year. Evidence of policy tightening weighing on borrowing is clearest in bank loan growth which, apart from during last year’s …
10th June 2021
Factory-gate inflation hits twelve-year high Producer price inflation continued to surge and reached its highest level since September 2008 last month, on the back of a further rise in global commodity prices. That said, there are some signs in the data …
9th June 2021
Downhill from here? Headline trade growth remained elevated last month. But trade volumes dropped back in levels terms and, while supply constraints are partly to blame, there are signs that demand may have peaked too. Export growth dropped back from …
7th June 2021
Financial support unlikely to trigger baby boom The big news this week was that couples in China will soon be allowed to have three children, up from two currently. We covered the initial announcement here , noting that since the shift from a one-child …
4th June 2021
Industry remains strong but supply shortages worsening Unlike the official PMI survey released yesterday, the Caixin manufacturing index published today rose last month. The key takeaway is that while output edged up on the back of still strong demand, …
1st June 2021
State media announced today that China’s family planning policy will be relaxed to allow all families to have three children, up from the current limit of two. This comes shortly after China’s once-a-decade census showed that its population is aging even …
31st May 2021
Supply shortages continue to stoke price pressures The latest surveys suggest that stronger construction activity nudged up overall growth this month and that supply shortages are pushing up prices even as final demand for manufactured goods appears to be …
Renminbi turning point deferred Regulators pledged to squeeze speculation out of domestic commodity markets last week. This week it was the turn of the foreign exchange market. A number of local analysts and researchers in recent weeks have called for …
28th May 2021
Our China Activity Proxy (CAP) suggests that output rose further above its pre-virus trend last month thanks to the recent rebound in services and continued strength in industry and construction. We still think that activity will level off over the rest …
In this Focus we detail what is known about how China’s central bank digital currency (CBDC) will operate, when it will launch, what the People’s Bank is trying to achieve, and whether it will succeed. One conclusion is that the launch of eCNY will do …
27th May 2021
In the short-run, China has no choice but to grit its teeth and keep buying Australian iron ore, even as bilateral ties continue to fray . But this dependence will diminish over time thanks to increased supply from other sources, greater use of recycled …
26th May 2021
Over half of global jabs now happening in China Of the 177 million COVID-19 vaccine doses injected globally during the past week, a staggering 95 million have been in China. That’s not just a function of China’s population size. As we predicted would …
21st May 2021
Commercial banks left the Loan Prime Rate (LPR) unchanged for the 13 th consecutive month today. Official goals for reining in credit have already been achieved by other means. As such, we do not expect any changes to policy rates in the coming months. …
20th May 2021
A softer start to Q2 Year-on-year growth on all indicators dropped back last month. This partly reflects a less flattering base for comparison. But current momentum was also a bit softer, especially for retail sales. We think m/m growth will remain modest …
17th May 2021
In its Q1 Monetary Policy Report published on Tuesday, the People’s Bank (PBOC) argued that inflationary pressures are likely to remain modest within China. The authors acknowledged that strong demand as well as supply shortages are driving rapid gains in …
14th May 2021
Credit slowing faster than most anticipated Both bank lending and broad credit dropped off more sharply than most expected in April. Apart from during last year’s lockdown, loan growth hasn’t been this slow in nearly two decades. The net increases of both …
12th May 2021
After a month-long delay, the key results from China’s once-a-decade census were published today. They weren’t as bad earlier media reports had suggested – the population continued to rise at much the same pace last decade as it did in the 2000s and, if …
11th May 2021
Factory-gate inflation hits three-year high Producer price inflation was the strongest since October 2017 last month, as upstream price pressures remained significant due to supply constraints. This is feeding through to a rebound in consumer price …
Trade values remain elevated but fail to gain further ground Headline trade growth picked up last month thanks to favourable base effects. But in seasonally-adjusted terms, exports continued to level off and the rebound in imports stalled. This partly …
7th May 2021
More travel but consumers still holding back Domestic tourists made 230 million trips over the five-day Labour Day holiday which concluded on Wednesday, beating the pre-pandemic record of 195 million trips in 2019. One caveat, however, is that the holiday …
External tailwinds continue to boost recovery Hong Kong’s y/y GDP growth turned positive in Q1 for the first time since Q2 2019. Even after accounting for base effects, the economy expanded impressively thanks to the strength of exports. With the virus …
3rd May 2021
