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The latest data point to a 20% q/q contraction in GDP this quarter (-16% y/y), even on the official figures. Given the shock to incomes and employment, the continued concern about the threat of further infections within China, and the growing disruption …
18th March 2020
Weakest-on-record data point to a sharp contraction in Q1 The latest activity and spending data were much weaker than expected and point to a far deeper downturn than during the Global Financial Crisis. While domestic conditions should improve slowly in …
16th March 2020
The People’s Bank has taken another step to push down borrowing costs. China’s economy is still operating far below its normal capacity but, with only eight new infections reported nationally in the latest daily figures, the central government is now …
13th March 2020
PBOC may revive old policy tool Policymakers have signalled that further monetary loosening is imminent. The State Council is calling for cuts to banks’ required reserve ratio (RRR) and PBOC officials are dropping hints about a possible cut to benchmark …
Some countries have managed to control the new coronavirus without large-scale quarantines or economic shutdowns. But they have achieved this by preventing the virus from spreading within the community in the first place. The only places that have so far …
11th March 2020
Policy support keeps the credit taps on Credit growth was stable last month despite the slump in economic activity. In most countries, credit growth would slow sharply in response to a shock such as the coronavirus, as households defer large purchase and …
As the world’s largest oil importer, China stands to gain from the recent fall in oil prices. But the boost to growth will be modest and won’t make up for the hit to Chinese exports from weaker global demand. Oil prices have fallen 20% this week, bringing …
10th March 2020
A disinflationary shock The coronavirus outbreak is putting downward pressure on inflation. While supply chain disruptions have kept food prices high, weaker demand has weighed on the price of other goods and services. Consumer price inflation fell from …
Imports yet to reflect the slump in demand Exports dropped the most since 2008 at the start of this year. Imports held up better but at the expense of a jump in inventories. Inbound shipments will soon play catch-up with the slump in domestic demand. …
9th March 2020
Activity continues slow march back to normality Disruption from efforts to contain the coronavirus outbreak has continued to ease during the past week, with most of the daily indicators that we track on our coronavirus webpage pointing towards recovery. …
6th March 2020
China is easing monetary policy and lining up fiscal stimulus measures worth at least 2% of GDP. The impact will be muted as long as the workforce is still facing major disruption. But these measures should help restore output to a normal level in the …
5th March 2020
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
An unprecedented slump in activity The latest PMI readings were in line with our downbeat expectations but will come as a shock to most analysts, who had anticipated a much smaller hit to business activity from the coronavirus outbreak. Particularly …
Chinese factories were slow to reopen even after the extended Lunar New Year holiday came to end. One week after most of the country officially went back to work on 10 th February, more than half of large industrial firms remained closed. That has now …
28th February 2020
Foreign demand and global supply chains at risk The number of new COVID-19 cases in China continued to decline this week. But local officials still appear cautious about relaxing containment measures, for fear of being held responsible for a renewed …
With normal activity taking longer to recover than seemed likely earlier this month, we now think that China’s economy will contract outright in year-on-year terms this quarter, for the first time since at least the 1990s. The leadership appears to be …
26th February 2020
The 2020-2021 budget that the Hong Kong government announced earlier today is large in scale and should help offset the damage that the coronavirus outbreak is having on companies and consumers. But there is little the government can do to address the …
Half of the economy running at half speed While the number of new coronavirus cases has continued to trend down in the past week, the disruption to economic activity has persisted. There are some tentative signs of an uptick in property sales and …
21st February 2020
Fiscal stimulus helps offset coronavirus hit to credit demand Strong government bond issuance left growth in outstanding broad credit unchanged last month, though weaker corporate borrowing suggests that the uncertainty caused by the coronavirus was …
20th February 2020
Commercial banks cut the Loan Prime Rate (LPR) today in response to moves by the People's Bank earlier in the month to lower their funding costs. While more easing is likely in the coming weeks, this alone won’t change the fortunes of the millions of …
The vast majority of firms in China have enough funds to keep paying their creditors and employees for at least a couple of months amid the disruptions caused by the coronavirus outbreak. But a minority are already having to lay off workers and job losses …
19th February 2020
The People’s Bank (PBOC) has taken yet another step to help banks and borrowers weather the economic disruption from the coronavirus outbreak. But more easing will probably be needed. The PBOC has just cut the one-year rate at which it lends to banks via …
17th February 2020
Virus has pushed economy into extended slumber During the week-long holiday that follows Lunar New Year day (25 th Jan. this year) it’s common for much of the economy to slow or even grind to a halt as workplaces shut down and migrant workers return home. …
14th February 2020
A jump in reported cases and deaths appears to reflect the official figures getting a better grip on the true extent of past infections, rather than indicate a recent acceleration in the spread of the virus. If anything, the latest data continue to hint …
13th February 2020
China’s economy is likely to contract sharply in the first quarter, as a result of the measures that have been taken to limit the spread of the new coronavirus. The apparent slowdown in new infections in the last few days should raise hopes that output …
12th February 2020
Efforts to contain the virus are becoming less draconian but with many factories struggling to re-open and households not spending, it will be a while before the drag on growth fades. Reuters reported today that President Xi warned officials last week not …
11th February 2020
Inflation hits eight-year high Seasonal volatility and coronavirus disruptions pushed up consumer prices in January. But the PBOC is likely to look through this temporary rise in inflation when setting policy. Consumer price inflation increased from 4.5% …
10th February 2020
Some signs spread of virus may be slowing… China’s near-term economic outlook hinges on how long measures to contain the spread of the virus remain in place. We know that the hit to activity has been significant , though – as today’s delay of the release …
7th February 2020
PBOC leans against renminbi depreciation The PBOC doesn’t appear to have deployed its FX reserves last month to limit renminbi depreciation triggered by the coronavirus outbreak. But there are signs that it has intervened in other ways. The value of the …
Policymakers have loosened both monetary and fiscal policy in an effort to soften the economic blow from the coronavirus. Further easing is likely in the coming weeks. But if the virus peaks soon then activity may rebound quickly, with stimulus now coming …
6th February 2020
Data due in the next week or so should give a better sense of how badly economic activity has been hit by the outbreak. And given the incubation period of the virus, the effectiveness of the containment efforts will also start to become clearer, providing …
4th February 2020
Coronavirus to exacerbate ongoing recession Hong Kong’s economy continued to contract last quarter and the Coronavirus outbreak will probably keep the city in recession for a while longer. The city’s GDP contracted 0.4% q/q in Q4 in seasonally adjusted …
3rd February 2020
The People’s Bank has lowered the rates it charges banks for short-run liquidity. Given the mounting toll of the Coronavirus outbreak, we expect more cuts in the coming months. The People’s Bank (PBOC) has just cut its 7-day reverse repo to 2.40% from …
Survey fails to capture Coronavirus shock While the Caixin manufacturing PMI edged down last month, the survey was conducted too early to tell us much about the extent of the economic damage from the Coronavirus outbreak. The February survey data will …
The new coronavirus was first identified exactly a month ago. In our first mention of it three days later, we noted that it was “drawing comparisons to SARS.” Initially, SARS was an illustration of how bad the outbreak could be. But SARS now looks like a …
31st January 2020
Overtaken by the coronavirus The official PMIs show that manufacturing activity weakened, and non-manufacturing strengthened, in the lead-up to the Coronavirus outbreak. The following months’ PMIs will give insight into how damaging the virus is. The PMIs …
The number of deaths inside China attributed to the new coronavirus is now on course to exceed those from SARS by early next week. The measures taken by the government and the public to limit transmission are having a significant economic impact. …
30th January 2020
Our China Activity Proxy (CAP) estimate for China’s rate of growth in December is somewhat academic at this point but, for what it’s worth, it showed the economy holding up well. Measures to constrain the new coronavirus will have dealt a sizeable blow to …
28th January 2020
Even if the coronavirus outbreak is brought under control quicker than SARS was in 2003, the economic impact now looks likely to be of at least a similar scale. We estimate that SARS lowered China’s growth by three percentage points in the worst-affected …
27th January 2020
Virus starting to take a toll on economic activity When we first discussed the potential impact of the coronavirus on Tuesday, there were 300 confirmed cases and six fatalities. Those numbers have since jumped, to 830 infections and 25 deaths. The rapid …
24th January 2020
Overview – Cooling property construction is likely to weigh on economic activity in the coming quarters. But with external demand starting to stabilise, the slowdown should be gradual, as long as the coronavirus outbreak is contained. External Demand – …
23rd January 2020
Fears are growing about the spread of a newly-identified coronavirus across Asia. In this Update we discuss the likely implications for the region’s economies. Stock markets across the region fell today as fears over the spread of the virus escalated. It …
21st January 2020
PBOC on hold, for now The Loan Prime Rate (LPR) was unchanged in January. The one-year rate remained at 4.15% (both the Bloomberg consensus and our forecast was 4.10%), and the five-year rate stayed at 4.80%. The LPR replaced the PBOC’s traditional …
20th January 2020
Hurdles remain to Wall Street’s China dream The Phase One trade deal signed this week includes commitments by China that will widen market access for US non-bank financial institutions (NBFIs). Foreign ownership caps on insurance, securities, futures and …
17th January 2020
Economic activity finishes 2019 on a stronger note Economic activity picked up last month, helping to avert a further slowdown last quarter. But despite the recent uptick in activity, we think it is premature to call the bottom of the current economic …
Monetary easing still insufficient to lift credit growth Growth in outstanding broad credit was unchanged last month as a slowdown in bank lending and direct financing was offset by an easing contraction in shadow credit. With credit growth less …
16th January 2020
The trade deal between the US and China marks an end to the first phase of the trade war. China’s pledges on imports from the US are unlikely to be met but that may not matter to the deal’s long-term success. It removes the downside risk of imminent …
15th January 2020
Trade data less upbeat than meets the eye Headline trade growth surged in December. But this is more a reflection of base and price effects than of current strength. And while the outlook for exports is improving, domestic demand will remain subdued. …
14th January 2020
Recovering pork supply to offset higher oil prices Fuel prices jumped in December, pushing non-food inflation to a 5-month high. Another pick-up seems likely this month, even though the spike in oil prices following the killing of Iranian General …
10th January 2020
Pressure on food prices ease Moderating food price inflation took the pressure off consumer price inflation while producer price deflation eased thanks to base effects and an increase in energy prices. The big picture is that demand-side pressures remain …
9th January 2020