Filtered by Subscriptions: China Economics Use setting China Economics
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 …
2nd March 2020
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
Outflows shrink as trade tensions ease The official foreign exchange reserves figures suggest that the PBOC continued to refrain from direct FX intervention last month on the back of easing trade tensions. With outflows moderating – and pressure on the …
7th January 2020
Hukou reform not a gamechanger for property The scrapping of restrictions on residency (hukou) in smaller cities announced last week might give a boost to property markets in some places but it will be small. With urbanisation slowing and population …
3rd January 2020
External demand recovering but construction cooling The manufacturing PMIs ended 2019 higher than where they started the year but we doubt this means the worst is over for China’s economy. While it does appear that export growth is bottoming out, downside …
2nd January 2020
Our China Activity Proxy (CAP) suggests that growth picked up last month. That’s a challenge to our expectations of a slowdown in growth in 2020. But the resilience of property construction still looks unsustainable. If this sector slows significantly so, …
20th December 2019
Bond defaults hurting credit allocation Corporate bond defaults continue to dominate the headlines. As we argued two weeks ago , the recent pick-up in defaults adds to broader evidence that corporate balance sheets remain under strain. That said, it …
This Update was originally sent to clients as a Rapid Response immediately after the announcement by the PBOC. The Loan Prime Rate (LPR), the reference point against which banks now price loans, held steady in December. The one-year LPR was unchanged at …
China’s apparent reluctance to commit to the extra $200bn of US imports relative to 2017 levels that the US is requesting over the next two years as part of the Phase One deal is understandable: achieving the target would require imports from the US to …
18th December 2019
The People’s Bank has made another small downward adjustment to the rates it charges banks for short-run liquidity. We expect further cuts in the coming months, which will open the door to lower interbank rates and encourage banks to cut lending rates . …
Strong headline figures only half the story The activity and spending indicators beat expectations. But retail sales and real estate activity are weaker than the headline figures suggest. And we think growth will resume its downward trend before long. …
16th December 2019
“Phase One” deal may not stick A deal appears to have been reached which will avoid the tariffs on $160bn worth of US imports from China that were scheduled to come into force on Sunday. The details have yet to be confirmed but China has reportedly agreed …
13th December 2019
Domestic headwinds will continue to weigh on growth next year, even as the external environment starts to improve. We expect this to trigger additional policy easing, with the PBOC likely to cut rates by more than most anticipate and allow the renminbi to …
12th December 2019
Monetary easing still failing to lift credit growth Growth in outstanding broad credit was unchanged last month, despite recent monetary loosening by the People’s Bank. This suggests that more aggressive action will be needed to shore up growth. Chinese …
10th December 2019
