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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. …
9th July 2021
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
The Q1 industrial profits data published this week were very strong. Net profits continued rise rapidly and are now 50% higher than they were two years ago. Only a third of this is due to higher sales. Instead, the bulk of the increase has come from …
30th April 2021
Not falling, as far as we know The statistics bureau issued a terse statement on Thursday that “According to our understanding, China’s population continued to grow in 2020.” This rather diffident rebuttal of Tuesday’s FT story only increases anticipation …
A weaker start to Q2 The latest surveys suggest that growth edged down this month. Supply-side disruptions appear mostly to blame for a slower rise in manufacturing output. But there are also signs of a demand-led slowdown in construction and services. …
Download the pdf for the full Outlook Overview – After treading water in Q1, activity should pick up again this quarter following the relaxation of domestic travel restrictions. But growth will be more modest than most expect over the next couple of years …
28th April 2021
China’s census has revealed the first population decline since the Great Leap Forward, according to the FT. If this is confirmed and the beginning of a trend, China’s challenge in sustaining rapid long-run economic growth has become even harder. While …
27th April 2021
Our China Activity Proxy (CAP) suggests that growth picked up last month as virus containment efforts were lifted. But this wasn’t enough to prevent a marked slowdown in q/q growth last quarter. With the export boom running out of road and the prop from …
26th April 2021
A window onto the service sector The detailed sectoral GDP data for Q1 were published over the weekend. The breakdown of services activity is particularly useful as it provides a view over parts of the economy that aren’t captured by high-frequency macro …
23rd April 2021
Commercial banks left the Loan Prime Rate (LPR) on hold today. Given that official efforts to rein in credit are being achieved by other means, we do not expect any changes to policy rates in the coming months. The one-year LPR was unchanged at 3.85% …
20th April 2021
Flattering base effects mask sharp slowdown China’s GDP growth jumped to a record high in y/y terms last quarter. But this was entirely due to a weaker base for comparison from last year’s historic downturn. In q/q terms, growth dropped back sharply and, …
16th April 2021
Default risk spreads to financial bonds Bonds issued by Huarong Asset Management, China’s largest distressed debt manager, have seen their price plunge recently after the firm delayed the publication of its 2020 results, reportedly due to significant …
Imports at record high, exports soften a touch Export and import growth remained elevated in y/y terms last month, even as base effects turned slightly less favourable. In level terms, exports dropped back slightly but imports continued to rise thanks to …
13th April 2021
Credit growth resumes its downward trajectory After an uptick in February, the slowdown in credit growth resumed in March. Hawkish signals in the government’s work report suggest that the deceleration will continue as policymakers focus on reining in …
12th April 2021
PBOC moves to slow credit growth The readout from the latest PBOC Monetary Policy Committee meeting struck a dovish tone. In particular, a pledge to lower real lending rates means readers could be forgiven for thinking that the central bank is still in …
9th April 2021
Factory gate prices jump by most in four years Consumer price deflation reversed last month due to a jump in fuel prices and an uptick in core inflation. But evidence of intensifying price pressures was clearest in producer price inflation, which was the …
