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New restrictions on travel will disrupt Lunar New Year plans for many families in China but they should also reduce the disruption to manufacturing and construction that normally causes output to slump in the first quarter of the year. The new government …
27th January 2021
Our China Activity Proxy (CAP) suggests that growth softened slightly at the end of 2020 but remained strong on the back of a further improvement in services. Domestic consumption should continue to pick-up this year as foreign demand drops back and …
22nd January 2021
Anti-trust guidelines target Ant and Tencent The PBOC issued draft guidelines on Wednesday that set explicit market share ceilings for non-bank payment providers, offering greater clarity about what the government’s anti-trust push against China’s tech …
Overview – China’s economy will continue to beat most expectations in the near term, as households spend more freely. But momentum will soften during the second half of the year as props from stimulus and exports fade. Consumer Spending – Household …
21st January 2021
Commercial banks left the Loan Prime Rate (LPR) on hold today. But with monetary conditions already being tightened in practice and underlying inflation set to rebound, we think it is still likely that the PBOC opts to formally hike rates later this year. …
20th January 2021
The detailed breakdown of China’s Q4 GDP data published today shows that the services sector, which had been lagging construction and industry, has returned to its pre-virus growth path, with all types of services activity now expanding in year-on-year …
19th January 2021
Strong end to 2020 pushes Q4 GDP above pre-virus rates On the official figures, China’s economy expanded at the fastest pace in two years last quarter. The monthly data suggest that growth dropped back slightly heading into 2021 but it remains strong. We …
18th January 2021
Virus flare-up to dampen holiday travel China reported 210 new COVID-19 cases today (66 of them asymptomatic), the highest daily tally since March. The virus flare-up began in Hebei province but has spread more widely than previous localised outbreaks. A …
15th January 2021
Trade remains resilient amid lockdowns abroad Exports continued to do well last month, as renewed lockdowns abroad ensured the shift in consumption from services to goods persisted in many of China’s trading partners. Meanwhile, a pick-up in import growth …
14th January 2021
Credit growth continues to slow as bond defaults weigh The slowdown in broad credit growth gathered momentum in December. We think credit growth will drop back further in the coming months as the PBOC continues to focus on reining in financial risks now …
13th January 2021
Consumer price deflation reverses as food prices rise Headline inflation returned to positive territory last month as the drag from pork prices eased. Broader price pressures also edged up on the back of stronger demand. With underlying inflation likely …
11th January 2021
COVID-19 battle not over but vaccines offer hope Shijiazhuang, a city of 11 million and the capital of Hebei, was put into lockdown on Thursday, after recording 117 new coronavirus cases the previous day (67 of them asymptomatic). Mass testing is being …
8th January 2021
The share of bank loans flowing to the property sector has doubled during the past 15 years. But new restrictions are likely to put an end to this upward trend. Coupled with broader limits on developer debt introduced last year, the scene is set for a …
Industrial rebound peaking The latest manufacturing surveys suggest that factory activity remained strong in December but that the pace of expansion has started to ease. The official non-manufacturing PMI suggests that growth elsewhere also softened, with …
4th January 2021
COVID-19 has wreaked havoc on the world economy, which is set to contract the most since WWII this year. China has not been immune – it is on track for its slowest growth since the Mao era – but set against the gloomy global backdrop, its economic …
23rd December 2020
Our China Activity Proxy (CAP) suggests that growth remained robust last month thanks to a further pick-up in services and continued strength in construction and exports. We expect growth to remain above-trend for a while even as policy support is …
21st December 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. But with China’s leadership eyeing a gradual withdrawal of policy support, we think the PBOC will start to hike its policy rates next year. The one-year LPR was unchanged at 3.85% (both the …
Politburo tea leaves ahead of the CEWC We’re still awaiting news out of the Central Economic Work Conference (CEWC), which sets the economic targets and policy priorities for the coming year. (See here for what to expect.) We did, however, get some hints …
18th December 2020
Activity goes from strength to strength China’s economy continued to accelerate across all fronts in November. We expect output to remain above-trend in the coming quarters, even as tailwinds from stimulus and exports start to ease. Industrial production …
15th December 2020
CEWC to discuss withdrawal of COVID stimulus China’s leadership will gather in the coming days for the Central Economic Work Conference (CEWC), an annual meeting that sets the economic targets and policy priorities for the coming year. The discussions are …
11th December 2020
Credit growth starts to slow as bond defaults weigh After accelerating in recent months, broad credit growth slowed slightly in November. We think this marks the start of a slowdown in credit growth as the PBOC turns its attention to tackling financial …
9th December 2020
Slip into deflation no cause for alarm Consumer prices fell year-on-year for the first time since 2009 last month. But this was almost entirely driven by a rebound in pork supply and isn’t evidence of faltering demand. To the contrary, broader price …
Exports at record high while imports remain resilient Exports jumped last month largely due to a surge in consumer goods exports as renewed COVID-19 flare-ups kept consumption in many of China’s trading partners skewed towards goods rather than services. …
7th December 2020
US to curtail China’s access to its capital markets On Wednesday, the US House of Representatives passed the “Holding Foreign Companies Accountable Act”, which has already cleared the Senate. If it is signed into law by President Trump, as seems likely, …
4th December 2020
China’s rebound from the COVID-19 shock has been swifter and stronger than most anticipated. We think its economy will continue to surprise to the upside for a while, paving the way for PBOC rate hikes and further renminbi appreciation. But the property …
Industry goes from strength to strength The Caixin manufacturing PMI hit a decade high in November. The official survey released yesterday also rose, to its highest in three years. While the rebound in industry will eventually lose steam, policy stimulus …
1st December 2020
Rebound continues to strengthen The latest official PMI surveys show that the pace of economic growth picked up in November on the back of a broad-based improvement in both services and manufacturing. The official manufacturing PMI rose from 51.4 in …
30th November 2020
Lockdown boost to exports will fade… The growing likelihood that effective vaccines will soon be available in major developed economies has brightened the global economic outlook. But an end to lockdowns and a revival of spending on services in major …
27th November 2020
There is no clearer sign that China’s economy is back to normal than the return to centre stage of concerns about property developers, the bad debts of SOEs and financial risks. Regulators’ tolerance for defaults ebbs and flows with their confidence in …
25th November 2020
Economic strength opens the door to more defaults China’s credit market had been quiet for much of this year. Following a couple of large bond defaults in the early days of the COVID-19 outbreak, the authorities quickly stepped up support for struggling …
20th November 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today, after the PBOC moved to mitigate the impact of corporate bond defaults on interbank liquidity. With growth now back to its pre-virus path and attention turning to financial risks, we think the …
Our China Activity Proxy (CAP) suggests that growth continued to accelerate last month as service sector activity returned to its pre-virus path, while strong construction and exports continued to boost industry. On our estimates, China’s economy is now …
19th November 2020
Consumption and services back to normal The latest data suggest that the broad-based acceleration of China’s economy continued in October. Policy stimulus continued to boost investment and industrial output while growth in real retail sales and services …
16th November 2020
Would a vaccine help China’s economy? China is a rare example of an economy that would be worse off initially if effective COVID-19 vaccines were rolled out globally. The diversion of household spending in major economies from services to goods has served …
13th November 2020
Talks to establish the world’s biggest free-trade agreement, the Regional Comprehensive Economic Partnership (RCEP), are finally expected to conclude at the weekend. While a deal would provide a boost to sentiment, the direct economic benefits would be …
12th November 2020
Acceleration in credit growth continues Broad credit growth hit is highest level in nearly three years as faster growth in direct financing and shadow credit more than offset slower bank lending. We think this acceleration will continue until the turn of …
11th November 2020
Food price drop drags inflation to eleven-year low Headline consumer price inflation fell sharply in October, to its lowest since 2009. But this was almost entirely due to falling food prices – core inflation and factory gate inflation held steady last …
10th November 2020
Exports and imports remain near record highs Exports continued to do well last month thanks to a shift in consumption, from services toward goods, in many of China’s trading partners. Meanwhile, inbound shipments held up better than the decline in …
9th November 2020
A Biden presidency won’t reverse the tide of US-China decoupling and could lead to economic strains on new fronts if climate change and human rights become greater US priorities. While some ballots are still being counted and the composition of the US …
6th November 2020
Ant IPO a reminder that Party control comes first The Ant IPO, which was set to be the world largest, was abruptly suspended on Tuesday, just two days before it was due to go ahead. The suspension was pinned on a change in the regulatory environment, …
Rebound continues to broaden The Caixin manufacturing PMI points to an acceleration in manufacturing activity in October. Admittedly, the official survey released on Saturday pointed to a marginal slowdown. But taken together, they suggest that momentum …
2nd November 2020
Fiscal and external tailwinds kickstart recovery Hong Kong’s economy expanded for the first time in over a year last quarter, thanks to fiscal stimulus and stronger foreign demand. Output is still well below its previous peak due to the double blow from …
30th October 2020
Officials remain tight-lipped on policy specifics The Fifth Plenum, held in Beijing to discuss the government’s 14 th Five-Year Plan (FYP) and long-run goals, concluded yesterday. The post-meeting communique mostly just confirmed the broad outlines that …
China’s leaders concluded their discussions on the 14 th Five-Year Plan today. The initial post-meeting communique offered few new details but more may be revealed at a press conference tomorrow. The priorities the Plan sets will shape the country’s …
29th October 2020
Inward shift is rational but will come at a cost China’s leadership will gather in Beijing next week to discuss the 14 th Five-Year Plan. The meeting will take place behind closed doors and the full plan won’t be made public until next March. But China’s …
23rd October 2020
Our China Activity Proxy (CAP) suggests that growth continued to accelerate last month, thanks to policy stimulus, strong foreign demand and fewer constraints on services activity. On our estimates, China has fully recovered from the COVID-19 downturn and …
22nd October 2020
The detailed breakdown of China’s Q3 GDP data published today shows that the recovery within the service sector remains highly uneven. Encouragingly though, all types of services activity showed a clear improvement, especially among the sectors hardest …
20th October 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. With the PBOC appearing reluctant to keep monetary policy loose for longer than needed amid a broadening economic recovery, we think the next move in the LPR will be an increase early next …
Services & consumption getting back on track China’s economy continued its rapid rebound last quarter, with the recovery broadening out and becoming less reliant on investment-led stimulus. What’s more, the monthly data show that growth was still …
19th October 2020
West’s virus woes need not deal a major blow China’s goods exports have been strong despite the weakness of the global economy. Data published on Tuesday showed they rose 9.9% y/y last month, with the strength concentrated in shipments of consumer goods …
16th October 2020
