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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
It is by no means inevitable that the coronavirus crisis puts a big permanent hole in the supply capacity of economies (i.e. their ability to produce goods and services). With the right government policies, many economies should be able more or less to …
29th June 2020
Central government adds to the bond deluge The government and quasi-fiscal entities including LGFVs and policy banks have significantly ramped up borrowing in recent months. To the end of May, only 12% of this was by the central government. But since the …
26th June 2020
China’s exports have held up remarkably well in the face of the sharp slump in global activity. They contracted just 3.3% y/y in US dollar terms in May. The detailed trade data published today show that a large part of that resilience was the result of …
24th June 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. We may see a cut or two next quarter but most signs suggest that the bulk of monetary easing this cycle has already taken place. The one-year rate was unchanged at 3.85% (the Bloomberg …
22nd June 2020
Bank lending jumped in Q1, to the highest level relative to trend GDP since 2009. And recent data suggest that it has remained very strong this quarter. But comments yesterday by PBOC Governor Yi Gang suggest that bank lending will drop back in the second …
19th June 2020
We were already expecting China’s economy to return to its pre-virus path faster than other major economies and sooner than most forecasters anticipate. But with output already back to year-ago levels, an even swifter recovery now looks likely. Since we …
16th June 2020
Economy no longer contracting year-on-year State-led infrastructure construction jumped last month and pushed up growth in fixed asset investment and industrial production. Meanwhile, growth in services activity turned positive and suggests that overall …
15th June 2020
More signs that a construction boom is building What stood out most in the survey data for May was the official construction PMI, which rose to a nine-month high. The forward-looking components were particularly upbeat. New orders were the highest since …
12th June 2020
Credit growth continues to accelerate A jump in government bond issuance helped push credit growth to a 21-month high in May. The acceleration in credit growth has further to run and will add fuel to the economic recovery. Chinese banks extended …
10th June 2020
Underlying inflation close to bottoming out Consumer price inflation slipped further last month due to falling food prices, while subdued demand continued to weigh on factory gate prices. But food prices aside, the recent decline in inflation could be …
Weak external demand catches up with exports Export growth turned negative last month as lockdowns abroad weighted on global demand. And the ongoing domestic recovery failed to keep import growth from slipping further. A global recovery and further ramp …
8th June 2020
Government spending was subdued at the start of the year, in large part because work on infrastructure projects was disrupted by the COVID-19 lockdown and by the subsequent labour shortages due to the slow return of migrant workers. But now that those …
5th June 2020
Recovery remains steady but slow The PMIs show that the recovery in activity extended into last month and appears to have broadened out into parts of manufacturing that were previously struggling. But there are few signs of a marked pick-up in the overall …
1st June 2020
