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Hopes that President Xi would use his speech today on the 40th anniversary of the start of China’s “Reform and Opening Up” to announce a renewed push for market-based reforms were disappointed. Rather than signalling renewed economic liberalisation, the …
18th December 2018
China’s economic slowdown looks set to deepen next year, weighing on equity prices and the renminbi. Policy stimulus should put a floor beneath growth before the year is out but won’t drive a strong recovery. … What to expect in …
17th December 2018
China resumed purchases of US soybeans this week and pledged to cut auto tariffs. But to clinch a lasting trade deal, it will need to convince the US that it is moving ahead with long-promised structural reforms. There are some signs that a renewed reform …
14th December 2018
Investment and consumption both appear to have cooled last month, with softer foreign demand also weighing on industrial production. We think further weakness is on the horizon. … Activity & Spending …
Growth in broad credit weakened further in November, suggesting that policymakers will need to increase support over the coming months in order to stabilise economic growth. … Bank Lending & Broad Credit …
11th December 2018
Export growth slowed last month but this reflects unflattering base effects and softer global growth rather than US tariffs. A bigger concern is the sharp drop in import growth which, coupled with cooling factory gate inflation, suggests that policy …
10th December 2018
Speculation that the People’s Bank (PBOC) stepped up intervention last month to stabilise the exchange rate doesn’t appear to be borne out by the data on its FX reserves. … FX Reserves …
7th December 2018
The arrest of Huawei’s CFO and recent Trump tweets boasting that he is “Tariff Man” have sparked concerns about the durability of the US-China trade truce. But there are still some grounds for optimism. The Chinese government has now clarified its …
China’s property sector is crucial to the economy’s performance and to China’s demand for many materials. In this updated and expanded Handbook, we discuss the drivers of the property cycle and answer key questions on affordability, over-investment, …
4th December 2018
The ceasefire agreed by Trump and Xi will help avert a sharp slowdown in US-China trade at the start of next year. But negotiations toward a lasting deal are likely to be fraught. And broader headwinds mean that China’s economy still looks set to slow …
3rd December 2018
The latest survey data suggest that conditions in industry remained broadly stable last month. But we still think that growth will slow during the next few quarters, even though the immediate threat of additional US tariffs has receded. … Caixin …
On the eve of the Xi-Trump showdown the latest data show that exports from China to the US of the goods affected by the first round of tariffs have fallen. But there is no sign that other countries are benefitting from diverted US demand. One possible …
30th November 2018
Downbeat official PMI readings for November suggest that growth remains under pressure, with signs that the recent uptick in construction activity is fizzling out as local governments pare back spending. … Official PMIs …
The trade war has so far resulted in a much sharper slowdown in China’s imports from the US than its exports to the US. But exports will weaken soon unless existing tariffs are rolled back. As things stand, the US has imposed tariffs of 25% on $50bn of …
28th November 2018
Expectations are low that Presidents Xi and Trump will resolve their differences at the G20 summit, but a temporary truce that puts on hold the planned US tariff hike in January is possible. In this Weekly we consider how the outcome of the meeting could …
23rd November 2018
Our China Activity Proxy (CAP) suggests that growth held up fairly well in October, supported by robust construction activity. But with a property demand weak and signs that developers are becoming more cautious, we expect growth to slow again before …
22nd November 2018
The spread of African swine fever (ASF) to China’s leading pig-rearing province (Sichuan) last week is an alarming development. But despite its rapid expansion across the country (the disease has spread to 18 of China’s 31 provinces in three months), the …
20th November 2018
The recent strength of direct investment into China is a reminder that, despite rising US tariff barriers, the country remains an attractive destination for foreign firms. Even so, policymakers shouldn’t get complacent. China will start to lose its allure …
16th November 2018
Hong Kong’s GDP growth slowed in Q3 to a two-year low in year-on-year terms, a trend we think will continue over the quarters ahead as headwinds from tightening monetary conditions and rising global protectionism build. … Hong Kong GDP …
The October activity and spending data were mostly better than anticipated. But despite an uptick in industrial output and investment, we doubt that economic growth has bottomed out just yet. … Activity & Spending …
14th November 2018
The pace of borrowing hit fresh lows in October, after a push by local governments to shore up infrastructure spending failed to have a lasting impact. Policymakers will therefore need to take further action in order to put a floor beneath economic …
13th November 2018
A closer look at the trade data for October bolsters our suspicions that firms have been frontloading shipments from China to the US. Meanwhile, President Xi opened this week’s import expo with an unambitious target for imports over the next 30 years. … …
9th November 2018
Headline consumer price inflation remained elevated in October. But with core inflation subdued and producer price inflation easing, we doubt policymakers will be too concerned. … Consumer & Producer Prices …
Chinese export growth picked up slightly last month, with no sign yet that US tariffs have had a major negative impact. Import growth also picked up, driven largely by growth in underlying volumes. … Trade …
8th November 2018
The PBOC appears to have intervened directly in the foreign exchange market again in October. But its intervention remains small in scale and seems calibrated to slow the renminbi’s fall rather than stop it. … FX Reserves …
7th November 2018
The Politburo statement this week gave a clear signal that further policy support for China’s economy is on the way. But with headwinds building, we don’t expect to see clear signs of economic stabilisation for some time yet. That statement, plus the …
2nd November 2018
The latest survey data, while not as bad as some feared, still paint a fairly downbeat picture. We expect the economy to weaken further in the coming months, triggering additional policy easing. … Caixin Manufacturing PMI …
1st November 2018
Downbeat official PMI readings for October suggest that while policy support is having some effect on construction activity, it has yet to fully offset broader downward pressure on the rest of the economy. … Official PMIs …
31st October 2018
The People’s Bank (PBOC) appears to have stepped up intervention recently to support the renminbi as it has approached 7.0 to the US dollar. Many are talking about that line as a psychological threshold that would trigger capital outflows if breached. We …
29th October 2018
Our China Activity Proxy (CAP) suggests that growth edged down last month and shows a more pronounced slowdown over the past year than the official GDP figures. We anticipate further weakness ahead as US tariffs bite and the cooling property market …
Policymakers are worrying about the widespread use in China of shares as collateral for lending – for good reason. But the remedies announced this week are unlikely to make much of a difference as long as share prices continue to fall. Meanwhile Xi …
26th October 2018
It comes as no surprise that Chinese officials are responding to slower growth by easing fiscal policy. But an increased focus on tax cuts and the lack of a revival in off-budget borrowing suggests that they are trying to do so in a way that avoids …
23rd October 2018
The PBOC has been hiding its efforts to support the renminbi over recent months. But a release this week showed the clear hand of the central bank: the PBOC’s balance sheet for September reveals the first sizeable sales of foreign exchange since the start …
19th October 2018
Official GDP growth slowed last quarter consistent with broader evidence that the economy is cooling. There are some early signs in the September data that policy support is starting to gain traction but we think more easing will still be needed in order …
A fresh slowdown in broad credit growth in September adds to the downside risks to growth and is likely to trigger further policy easing over the coming months. … Bank Lending & Broad Credit …
17th October 2018
Slower economic growth, monetary easing and escalating trade tensions will all put the renminbi under pressure in the months ahead. The People’s Bank will continue to lean in the other direction but, with capital outflows under control, we now think …
16th October 2018
Policymakers are likely to look through the latest pick-up in consumer price inflation and focus instead on evidence of cooling economic momentum, including slower core inflation and weaker factory gate price pressures. … Consumer & Producer Prices …
The stock market sell-off this week is a reminder that Chinese equities won’t be immune if, as we expect, the S&P 500 falls sharply next year. Meanwhile, data on tourism and retail spending during the week-long National Day holiday suggest that …
12th October 2018
Exports continued to defy US tariffs last month but imports softened in the face of cooling domestic demand. We expect both to weaken in the coming quarters as economic growth slows in China and among its major trading partners. … Trade …
Policymakers have responded to growing signs of weakness in China’s domestic economy by ramping up policy support. But with momentum still slowing and trade tensions escalating, growth will not stabilise until the middle of 2019. … Growth to slow further …
10th October 2018
We think the upcoming reduction in banks’ required reserve ratio will be followed by cuts to the policy rate to ensure that interbank rates fall far enough to boost lending. But despite its growing efforts to prop up economic activity, the People’s Bank …
8th October 2018
The People’s Bank faces a test when it sets the renminbi fix on Monday morning. With onshore markets closed for the past week, a wedge has opened between where the renminbi last stood onshore and its current weaker position offshore. A fix on Monday that …
5th October 2018
The latest PMI readings suggest that growth slowed last month. The breakdown points toward weaker exports, though it’s too soon to know if this is due to US tariffs or simply the result of cooling global growth. Meanwhile, a jump in the construction PMI …
1st October 2018
The People’s Bank clearly doesn’t feel under great pressure to “follow the Fed”. It left its policy rates on hold this week after the US Fed raised rates and we expect it to cut rates in the coming months. Meanwhile, after a recent surge in special bond …
28th September 2018
China’s financial markets shrugged off this week’s confirmation that both the US and China will be expanding their tariffs on Monday, with the Shanghai Composite actually having its best week since 2016. Meanwhile, unable to match the latest US tariffs …
21st September 2018
Our China Activity Proxy (CAP) shows surprisingly rapid growth in August. But with the impact of property controls and slower credit creation yet to be fully felt, growth still faces near-term headwinds. … Growth holding up but outlook still …
With a further $200bn of US tariffs now confirmed, and China reiterating that it will retaliate with tariffs of its own, we take stock in this short note of where China stands in the trade war. … Taking stock of the new …
18th September 2018
The US appears to be on the verge of expanding its tariffs to cover a total of $250bn of Chinese goods, the production of which generates 1.3% of China’s GDP. The proposed $200bn tariff list includes some consumer goods, though most have still been …
17th September 2018
Both sides in the US-China trade dispute have struck a more conciliatory tone in recent days. The White House has proposed renewed high-level talks. Meanwhile, Chinese officials are rowing back previous threats against US firms operating in China. Despite …
14th September 2018
Today’s activity and spending data are a mixed bag. On balance though, they do little to change our view that momentum is weakening and that policy easing won’t put a floor beneath growth for some time yet. … Activity & Spending …
