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The February trade data are downbeat, even accounting for seasonal distortions. Tariffs are weighing on shipments to the US. But broader weakness in global demand means that, even if Trump and Xi finalise a trade deal soon, the outlook for exports remains …
8th March 2019
There is a tension between the policy stimulus announced this week at the National People’s Congress and the government’s goal of keeping the debt ratio stable. Ultimately, we expect officials to err on the side of supporting growth. … On contradictions …
The People’s Bank (PBOC) does not appear to have intervened substantially in FX markets in February, suggesting that the renminbi is not facing much downward pressure at present. However, with the economy likely to slow further in coming months and …
7th March 2019
The key takeaway from today’s policy announcements at the opening of the National People’s Congress is that the leadership are still trying to balance efforts to support growth with concerns about financial risks. Officials pledged some moderate policy …
5th March 2019
The unofficial PMI rebounded last month, after slumping in January. Looking through this volatility, the survey data remain consistent with our expectation for a further slowdown in economic growth in Q1. … Caixin Manufacturing PMI …
1st March 2019
Policymakers are already billing the deleveraging campaign a success. But we doubt that the recent stabilisation of the debt ratio will prove durable. Meanwhile, Chinese equity prices have jumped beyond what is justified by easing trade tensions. With …
The latest survey data suggest that manufacturing output growth slowed last month, possibly to its weakest level since 2009. Construction activity also appears to have softened, raising questions over the strength of fiscal support. … Official PMIs …
28th February 2019
Hong Kong’s economy ended last year on a weak note as exports slumped and household spending softened. We think growth will remain subdued in the months ahead. The relatively expansionary budget unveiled today will provide some support. But tight monetary …
27th February 2019
Negotiators are making progress sketching out the specifics of a US-China trade deal, which suggests that Trump is likely to postpone the tariff hikes scheduled for next week. But the big picture is that any trade deal won’t avert a further economic …
22nd February 2019
The impact of US tariffs on China’s exports was initially masked by firms rushing out shipments of unaffected products in an attempt to beat any tariffs that came in later. That “front-running” seems to have run its course. The most recent US data show …
21st February 2019
Concerns about China’s external debt have increased recently as interest rates abroad have risen and slowing domestic economic momentum has put firms’ balance sheets under strain. But much of the country’s external debt is low-risk and unlikely to cause …
20th February 2019
Rising defaults have widened credit spreads during the past year, preventing borrowing costs for less creditworthy firms from falling in response to looser monetary conditions. Given that subprime borrowers drive the bulk of shadow lending and a large …
15th February 2019
The jump in bank lending last month was mostly seasonal. But after months of declines, broad credit growth did edge up in January, hinting that monetary easing may be starting to gain more traction. … Bank Lending & Broad Credit …
Below-consensus inflation in January suggests that demand remained sluggish at the start of the year. Factory gate prices are now falling, which is likely to feed through to weaker profit growth among industrial firms and put pressure on policymakers to …
The January trade data were much stronger than anticipated but seasonal volatility caused by annual shifts in the timing of Chinese New Year make it difficult to get a good grip on underlying trends at this time of year. Even if the latest recovery in …
14th February 2019
The People’s Bank (PBOC) appears to have intervened little in FX markets last month, suggesting that the renminbi is not facing much downward pressure at present. However, with the economy likely to slow and interest rates likely to fall further over …
11th February 2019
China looks likely to introduce only about half as much fiscal and monetary stimulus in response to the current downturn as it did in 2015/16. Any rebound in growth will be much more tepid as a result. The boost for countries that export to China will be …
6th February 2019
Progress in the US-China trade talks and the dollar’s fall following the US Fed’s dovish policy statement this week pushed the renminbi to a six-month high. But we think that pressure on the currency will return before long. Meanwhile, policymakers are …
1st February 2019
The slump in the Caixin manufacturing PMI reading in January to its lowest since February 2016 paints a much bleaker picture than the official PMI reading released yesterday. With the headwinds from cooling global growth and the lagged impact of slower …
While the official manufacturing PMI didn’t weaken any further in January, it still suggests that the economy lost momentum at the start of the year. … Official PMIs …
31st January 2019
Most recent signs point to a gradual deceleration in China’s economy but the import data are a key exception, showing an abrupt contraction in November and December. While there appear to be several factors at play, we can’t completely rule out a …
29th January 2019
Our China Activity Proxy (CAP) suggests that growth edged up in December driven by strong construction activity. But with credit now growing at the slowest pace in more than a decade and the impact of the government’s property controls yet to be fully …
28th January 2019
On paper, China’s rebalancing is going swimmingly, with the consumption share of GDP growth jumping last year to its highest level in almost two decades. But this is hard to square with broader data showing weaker consumer spending. One drag has been a …
25th January 2019
China’s working age population is currently falling by around 0.2% per year and in 2018 employment contracted for the first time in the reform era. These developments aren’t a surprise but the demographic outlook does appear to be deteriorating faster …
23rd January 2019
The detailed breakdown of China’s Q4 GDP data released today points toward softer service sector activity last quarter on the back of slower property sales and weaker consumer spending. We expect services growth to come under further pressure this year, …
22nd January 2019
Growth edged down last quarter, with the slowdown on the official GDP figures corroborated by other data. Conditions improved somewhat in December, but we expect the uptick in industrial output and consumer spending to prove short-lived. … GDP (Q4), …
21st January 2019
The liquidity injection by the PBOC this week was the largest on record. But it was mainly intended to manage the usual cash crunch ahead of Chinese New Year rather than loosen monetary conditions. The main constraint on further easing at the moment is …
18th January 2019
Officials have stepped up policy support in response to faltering domestic momentum. But with credit now growing at the weakest pace in more than a decade, the economy will not stabilise until at least the middle of this year. … Stimulus won’t prevent …
Policymakers have been making a coordinated effort today to provide reassurance that more stimulus is in the pipeline. But today’s data showing growth of outstanding credit still at its slowest pace in more than a decade suggests that the economy won’t …
15th January 2019
Export growth dropped more than anticipated in December as global growth softened and the drag from US tariffs intensified. Import growth also fell sharply in the face of cooling domestic demand. We expect both to remain weak in the coming quarters. … …
14th January 2019
The economic targets for 2019 that have been leaked this week signal official acknowledgement that China’s growth is slowing. Nonetheless, the low target for the fiscal deficit suggests that policymakers are still reluctant to launch major stimulus. A …
11th January 2019
With property sales slowing and monetary conditions likely to remain tight over the coming year, there are growing concerns about a possible slump in home prices in Hong Kong. We expect prices to fall by a third over the next five years, which will create …
10th January 2019
Following the drop back in oil prices, consumer price inflation returned below 2% last month. Meanwhile, producer prices are now on the brink of returning to deflation territory. Slowing inflation is the latest sign of cooling domestic demand and leaves …
The People’s Bank (PBOC) appears to have sold only a small amount of foreign exchange last month, suggesting that the renminbi has faced little downward pressure recently. … FX Reserves …
7th January 2019
In keeping with its usual practice of making policy moves late on Fridays, the PBOC today announced a 100bp cut to the required reserve ratio aimed at supporting the economy and managing liquidity ahead of Chinese New Year. With economic activity likely …
4th January 2019
Today’s cut to the required reserve ratio is partly about managing liquidity ahead of Chinese New Year. But it is also intended to provide support to the economy and will be reinforced with further easing soon. Given the pressures the economy is facing …
Our China Activity Proxy (CAP) points to a slowdown to near 5% growth in November. The government Economic Work Conference just concluded with a pledge to increase fiscal support and hints that monetary policy will be loosened further too. But it will …
21st December 2018
Xi Jinping used the 40 th anniversary of the start of China’s economic reforms to set out a narrative which placed state and, in particular, Party control at the heart of China’s subsequent economic successes. A stronger argument, in our view, is that …
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
