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Food aside, prices continue to recover from COVID-19 downturn Headline consumer price inflation, weighed down by easing food price inflation, continued its decline last month. But core consumer prices rose again for the second straight month and factory …
15th October 2020
Credit growth has yet to peak this cycle Broad credit growth hit is highest level in nearly three years. We think this acceleration should continue until early next year. Chinese banks extended RMB 1,900bn in net new local currency loans in September, up …
14th October 2020
Imports surge, exports remain resilient Exports continued to do well, most likely thanks to the recent strength of retail sales among China’s major trading partners. And a jump in imports suggests that domestic investment spending remains robust. Imports …
13th October 2020
Download the pdf for the full Outlook Overview – China has become the first major economy to return to its pre-virus growth path, thanks to its rapid containment of COVID-19 and effective stimulus response. The rebound initially leaned heavily on …
12th October 2020
Spending recovered further during Golden Week Tourist activity and spending during the nine-day “Golden Week” holiday that ended yesterday was substantially stronger than during holidays earlier in the year, but still depressed. That might point to …
9th October 2020
Golden Week to spur consumption growth China’s “Golden Week”, a nine-day holiday that combines both National Day and the Mid-Autumn Festival, kicked off yesterday. It could provide a much-needed boost to consumption, which has lagged the recovery in …
2nd October 2020
Rebound still going strong The latest PMIs show that economic activity continued to accelerate in September on the back of a broad-based improvement in both services and manufacturing. The Caixin manufacturing PMI edged down fractionally, from 53.1 in …
30th September 2020
The speed at which officials in China have pivoted from crisis response to another round of restrictions on property developers has caught many by surprise. Developers might have hoped that they would be enlisted again to help with stimulus, as happened …
28th September 2020
Foreign demand for CGBs is growing FTSE Russell yesterday announced that it will include China in its World Government Bond Index (WGBI). This is an important milestone and means onshore Chinese Government Bonds (CGBs) are now included in all major bond …
25th September 2020
Our China Activity Proxy (CAP) suggests that growth continued to accelerate last month. On our estimates, China is already back on its pre-virus growth path, far earlier than other major economies. There are still pockets of weakness in services but the …
23rd September 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. With the economy now largely back to its pre-virus path and the PBOC appearing reluctant to keep monetary policy loose for longer than needed, we think the next move in the LPR will be an …
21st September 2020
China’s economy is largely back to normal It’s now a consensus view that China’s near-term economic prospects are bright, especially relative to elsewhere. But even amid upbeat expectations, the August activity and spending data published this week still …
18th September 2020
The renminbi has risen 5% against the US dollar since May, to its strongest since early 2019. And with China on course for a more pronounced recovery than elsewhere, its external position the strongest in a decade, and onshore yields unusually attractive …
17th September 2020
Recovery continues as consumption rebounds Economic growth in China accelerated further in August as sentiment improved among consumers and private firms. Retail sales surpassed 2019 levels for the first time since the COVID-19 outbreak, while investment …
15th September 2020
China’s surplus is huge in global terms One extraordinary development of 2020 has been the impact of the biggest global economic slump in memory on the world’s biggest exporter. When much of the world went into lockdown, demand for masks, medical …
11th September 2020
Acceleration in credit growth continues Broad credit growth hit its highest level in two and a half years as growth in direct financing and shadow credit picked up amid steady bank lending. We think that this acceleration has further to run. Chinese …
For over a decade, we have tracked the performance of China’s economy independently from the official GDP figures using our China Activity Proxy (CAP). We are now introducing a revamped version of this popular indicator. In this Focus , we discuss why an …
10th September 2020
Core inflation bottoming out Headline consumer price inflation slipped last month on the back of easing food price inflation. But core consumer prices rose for the first time since the COVID-19 outbreak and the ongoing recovery in economic activity …
9th September 2020
Base effects flatter exports, imports stronger than meets the eye The pick-up in headline export growth last month reflects base effects and masks a slowdown in levels terms. Meanwhile, imports are doing just as well as exports once price effects are …
7th September 2020
Regulatory headwinds in property are intensifying China’s property sector rebounded rapidly from the COVID-19 downturn. In fact, sales and new property starts are now growing faster than they were at the end of last year. (See Chart 1.) And property …
4th September 2020
Manufacturing activity continues to strengthen The Caixin manufacturing PMI points to faster growth in manufacturing activity in August. Admittedly, the official survey released yesterday had pointed to a marginal slowdown. But taken together, they …
1st September 2020
Economy accelerates as services activity rebounds The latest official PMI surveys showed that the pace of economic growth picked up in August as stronger services activity more than offset a slight loss of momentum in manufacturing and construction. The …
31st August 2020
Low oil prices are boosting corporate profits… Chinese firms are benefiting from a favourable combination of strong demand at home but weak global demand for energy and low oil prices. Data published yesterday showed that profit growth among industrial …
28th August 2020
The consumption share of GDP had edged up in recent years, but that progress has been reversed by the COVID-19 stimulus response, which has focused on boosting investment. (See Chart 1.) The consumption share should start to rebound again soon as the …
27th August 2020
Banks hit with co-pay on stimulus bill When the Global Financial Crisis struck, Chinese policymakers leant heavily on the state-owned banks to shore up economic activity. While the 2009 RMB4trn fiscal stimulus package receives much of the credit, the …
21st August 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. Given signs that the focus of monetary policy has shifted to containing financial risks on the back of the relatively rapid economic recovery, we think the LPR will be unchanged for the …
20th August 2020
Demand for trucks rising at fastest pace since 2010 Data published this week showed that vehicle sales expanded 16.4% y/y in July, the fastest pace in over three years. Most of the focus has been on the strength of passenger car sales, which is …
14th August 2020
Recovery slows at the start of Q3 The latest data suggest that China’s economy continued to recover in July, though less quickly than expected. But a slowdown in the recovery was always likely at some point as the initial boost from re-opening faded. And …
Shadow banking revival nudges up credit growth Broad credit growth hit its highest rate in nearly two and a half years last month as a pick-up in direct financing and shadow credit offset slower issuance of bank loans. The acceleration has further to run. …
11th August 2020
Flooding pushes up food prices Consumer price rose last month following floods that disrupted agricultural production. Meanwhile, factory gate deflation continued to ease in July, reflecting the ongoing recovery in economic activity. Consumer price …
10th August 2020
A marriage of convenience heading for divorce US and Chinese officials will conduct a semi-annual review of the implementation of the Phase One trade deal at the end of next week. The discussions are likely to be fraught. The Chinese purchase commitments …
7th August 2020
Shipments point to a further recovery in domestic and foreign demand Imports edged up in level terms, consistent with the ongoing recovery in domestic activity. Meanwhile, exports jumped thanks to stronger foreign demand and the ongoing boost from …
Stimulus pushes index to nine-year high The official PMIs released on Friday had already pointed to a robust recovery at the start of Q3. But the Caixin index published today is even more upbeat and suggests that the pace of expansion in industry was the …
3rd August 2020
Private investment is down 7.3% y/y so far this year, held back by the uncertain economic outlook. State firms have stepped in to fill the gap. Despite a sharp downturn at the time of China’s lockdown in Q1, their capital spending rose 2.1% y/y during the …
31st July 2020
Recovery still going strong at the start of Q3 The latest survey data suggest that last quarter’s rapid economic rebound has extended into the second half of the year thanks to recovering foreign demand and strong fiscal support. The official …
The “nuclear option”? The threat of US sanctions on Chinese banks is drawing renewed attention to their reliance on SWIFT, the financial messaging system used to process most cross-border transactions. SWIFT is a co-operative of global banks and is …
30th July 2020
China’s success in containing COVID-19 and the short duration of its lockdown have enabled its economy to rebound rapidly. With policy support set to remain strong, China is on course to return to its pre-virus path by the end of the year, far earlier …
29th July 2020
Renewed virus outbreak to delay city’s recovery Hong Kong’s economy stabilised last quarter as fiscal stimulus and stronger demand in mainland China offset weaker consumption and investment. But with the city facing its worst COVID-19 outbreak yet, hopes …
Xi still see the state as the fix, not the impediment President Xi Jinping gave a speech this week in which he called for a “new development model” that emphasises a greater role for China’s domestic market in response to the global COVID-19 downturn and …
24th July 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. Further rate cuts seem increasingly unlikely as the focus of monetary policy appears to be shifting from stimulating activity to containing financial risks. The one-year rate was unchanged at …
20th July 2020
High savings mean plenty of room to spend more The main event this week was the Q2 GDP release . It beat expectations with growth of 3.2% y/y, fully reversing the contraction in Q1 and taking the level of output above its pre-virus high. This strong …
17th July 2020
The detailed breakdown of China’s Q2 GDP data published today raises some questions about the purported speed of the recovery. Generally though, it is consistent with broader evidence of a sharp rebound, led by industry and construction. Conditions in the …
Strong end to Q2 pushes GDP above pre-virus levels After a sharp contraction in Q1, the economy bounced back strongly in Q2, with the level of GDP reaching a new high. What’s more, the monthly activity and spending figures show that growth was still …
16th July 2020
Surge in imports signals strong domestic recovery Inbound shipments jumped the most in m/m terms in years, adding to evidence that domestic demand was strong at the end of Q2. Exports also strengthened as slower shipments of products related to COVID-19 …
14th July 2020
Acceleration in credit growth has further to run Broad credit growth hit a two-year high in June and the recent uptick in interest rates is unlikely to prevent a further acceleration in the coming months. Chinese banks extended RMB1,810bn in net new local …
10th July 2020
The stock market is a blunt policy tool Chinese equites have surged this week, after state-media talked up the need for a stock market rally in order to offset economic headwinds. There is some logic to such thinking. The link between stock prices and …
9th July 2020
Factory-gate deflation starts to ease Producer prices rose last month for the first time since the outbreak of COVID-19, adding to evidence that industrial demand had mostly recovered by the end of Q2. Core inflation fell to its weakest in a decade but …
Decoupling likely to weigh on productivity growth The passage of the Hong Kong National Security Law this week is putting further strain on China’s fraught relations with the rest of the world. China still has some friends: 53 UN members voiced support …
3rd July 2020
Highest reading in 2020 signals robust recovery The Caixin manufacturing PMI suggests that the pace of the recovery increased in June, echoing the official survey which was released yesterday. This supports our view that GDP growth likely turned positive …
1st July 2020
Activity ends Q2 on a strong note The latest survey data suggest that economic growth accelerated in June thanks to a faster recovery in manufacturing and services, alongside continued strength in construction activity. The recovery should remain robust …
30th June 2020
