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Our China Activity Proxy (CAP) suggests that economic growth slowed in July to the weakest pace in five months. We think the slowdown has further to run. The US-China trade conflict will be a drag on activity, though probably a small one. Instead, we …
22nd August 2018
Private firms and individuals may have pulled capital out of China in recent weeks in response to concerns about the renminbi, trade tensions and the economy. But intervention by state banks and firms has been enough to more than offset this, without the …
21st August 2018
One bright spot in the generally downbeat economic data released this week was a further acceleration in property sales and prices last month. The pick-up was driven by China’s smaller cities, where demand has been propped up by the shantytown …
17th August 2018
Commercial banks’ non-performing loans (NPL) rose by RMB183bn in Q2, the biggest increase in over a decade. On paper, bad loans now make up just under 2% of all loans, the highest ratio since the Global Financial Crisis. The official NPL ratio still looks …
16th August 2018
The activity and spending data for July all came in below consensus expectations despite surprisingly strong external demand. This highlights the continued strong headwinds to domestic demand from slower credit growth. … Activity & Spending …
14th August 2018
Growth in bank lending picked up last month to the fastest pace this year. However, a further slowdown in other forms of credit, including shadow financing, mean that broad credit growth continued to weaken in July to a fresh multi-year low. … Bank …
13th August 2018
Market interbank rates have now converged with those offered by the People’s Bank in its lending operations. We think the central bank will soon start cutting these official policy rates in order to sustain a further loosening of monetary conditions. … …
10th August 2018
Hong Kong’s economy slowed last quarter in year-on-year terms after expanding in Q1 at the fastest pace since 2011. Looking ahead, with headwinds from tightening monetary conditions building and external risks increasing, we expect economic growth to cool …
Today’s higher-than-expected inflation figures reflect a temporary boost from higher oil prices, along with the usual volatility in food prices. If anything, broader price pressures appear to be easing, a trend that is likely to continue in the coming …
9th August 2018
Chinese export growth held steady last month with few signs of much impact from the first round of US tariffs on $34bn worth of Chinese exports, which came into force on 6th July. Import growth jumped but this has more to do with base effects and higher …
8th August 2018
If carried out, China’s threat last week to expand tariffs to cover more than 70% of its imports from the US would nudge up import costs, though only very slightly. The renminbi’s recent depreciation will have a bigger impact but still not big enough to …
7th August 2018
A rise in China’s foreign exchange reserves in July suggests that the People’s Bank did not deploy them to defend the renminbi last month. It may do so soon, however, given growing concerns over outflows. … FX Reserves …
The People’s Bank is signalling increasing discomfort with the recent pace of renminbi declines, including with a new restriction on forward currency transactions today. But the depreciation so far in the exchange rate is already enough, by our estimate, …
3rd August 2018
The latest Caixin manufacturing PMI reading suggests that the sector lost a little momentum in July. We expect further weakness ahead. … Caixin Manufacturing PMI …
1st August 2018
The latest survey data suggest that a weaker renminbi is helping to dampen the impact of US tariffs but that domestic headwinds continued to weigh on economic activity in July. … Official PMIs …
31st July 2018
Policy easing efforts were expanded this week. Fiscal loosening was given the green light. The People’s Bank adopted a more proactive approach to ensuring that its liquidity injections translate into lower corporate borrowing costs and support lending to …
27th July 2018
Our China Activity Proxy (CAP) suggests that economic growth softened slightly last month after picking up in April and May. We think momentum will weaken further over the second half of this year. … Boost from looser pollution controls starts to …
26th July 2018
Capital outflows from China only picked up slightly in June despite the market sell-off in the second half of the month. But there are tentative signs in the early indicators that outflows accelerated in July. … Capital Flows Monitor …
24th July 2018
The State Council has called for more proactive fiscal policy, including additional tax cuts. This follows further, large liquidity injections by the People’s Bank. While the direct impact of these moves will be small, they leave little doubt over the …
The People’s Bank appears to be leaning against downward market pressure on the renminbi. But the depreciation it has allowed so far will already provide a cushion for China’s exporters as they face the prospect of further US tariffs – potentially on all …
20th July 2018
The Ministry of Finance is pushing back against calls to loosen policy. It may have little choice but to oblige, however, if headwinds to growth intensify in the coming quarters as we expect. … A shift in fiscal policy is …
19th July 2018
Corporate bond defaults in China have jumped recently, adding to worries about the economic outlook. July is on track to more than double the previous monthly record for the scale of onshore bonds entering default. The economic slowdown that we are …
The detailed breakdown of China’s Q2 GDP data released today points toward resilient service sector activity last quarter, with the booming IT sector more than offsetting a slowdown in retail spending. We doubt that services can defy the downward trend in …
17th July 2018
Official GDP growth edged down last month but, unsurprisingly, remained rapid and in line with the government targets. Debates about the true pace of growth aside, it’s noteworthy that whereas in previous quarters evidence of a slowdown was mostly …
16th July 2018
The release of disappointing credit data a month ago catalysed a deterioration in sentiment about China’s economy. Today’s even weaker figures will only add to those concerns, with the early signs suggesting that domestic activity also slowed in June. … …
13th July 2018
A further slowdown in lending in June adds downside risks to economic growth and is likely to trigger a policy response. … Bank Lending & Broad Credit …
Chinese exports held up well on the eve of US tariffs. But weaker-than-expected import figures point to a renewed slowdown in domestic demand heading into the second half of the year. … Trade …
China has more to lose economically from a trade war than the US. But the damage as the Trump administration expands tariffs will be mitigated by China’s high market share in many of the targeted products, which will push a portion of the cost onto US …
12th July 2018
The US is moving ahead with plans to impose a 10% tariff on an additional $200bn of imports from China. This will add to existing headwinds on China’s growth and is likely to trigger further policy easing. … Expanded US tariffs strengthen case for policy …
11th July 2018
Today’s inflation data show little change in price pressures last month beyond a mild boost from higher oil prices. Tariffs may start to inject some additional volatility into the price data soon but they don’t change our broader view that inflation is …
10th July 2018
Sentiment about China’s economic prospects has worsened recently as trade tensions have escalated. The tariffs announced so far won’t have a big impact though. Instead, we expect economic growth to slow in coming quarters due mainly to domestic headwinds. …
Chinese policymakers are intervening to stem market declines, but unevenly: they appear much more concerned about the currency than about equities. Meanwhile, worries about the domestic outlook continue to mount in parallel with those over trade. A surge …
6th July 2018
The latest PMI readings suggest that the economy lost some momentum last month. With credit growth still cooling and US tariffs imminent, we expect further weakness ahead. … PMIs …
2nd July 2018
A promise of support from the People’s Bank helped stem the slide in both the renminbi and Shanghai equities today. If declines resume next week, we would expect more forceful intervention to support both markets. Meanwhile, it has been a bad week for …
29th June 2018
The latest escalation of US threats against China has triggered a slide in the renminbi. The People’s Bank appears to have done little to resist the move so far, but it will remain wary that sustained falls could trigger another bout of capital outflows. …
26th June 2018
Worries about China’s economic outlook have increased recently. But our China Activity Proxy (CAP) suggests that growth strengthened in May to the strongest rate so far this year. … CAP eases growth …
25th June 2018
Yesterday’s required reserve ratio (RRR) cut is officially intended to support banks’ debt-to-equity swaps rather than mark a shift away from deleveraging and toward monetary easing. But in practice, the RRR cut does seem likely to result in looser …
Escalating trade tensions with the US have led the news abroad, but in China much of the focus over the past week has been on the outlook for the domestic economy and policy. An RRR cut appears imminent and more concerted policy efforts to support the …
22nd June 2018
Against a backdrop of rising trade tensions with the US and jitters about the wider outlook for emerging economies, capital flows in and out of China have been broadly balanced. Global investors still appear to be fairly optimistic about the prospects for …
21st June 2018
If President Trump follows through on his threat to expand further the range of Chinese goods subjectto punitive tariffs, China is likely to respond quickly by targeting US firms operating in China. This couldbe highly damaging for many of those companies …
19th June 2018
A trade spat with the US is one of a number of headwinds facing China’s economy over the coming year. They point to a slowdown not a slump. But the outlook further ahead is no better. Policymakers’ reluctance to allow market forces to determine economic …
15th June 2018
There have been clearer signs recently that China’s economy is slowing. We expect headwinds to economic growth to continue to build over the coming months and that this will prompt the People’s Bank to loosen policy in the second half of the year. … …
14th June 2018
Today’s activity data were a mixed bag as industrial production and real estate activity picked up but retail sales and investment spending cooled last month. We think that activity will slow over the rest of 2018 as headwinds from slower credit growth …
The value of new loans issued by Chinese banks edged down last month. But this often happens in May. More importantly, broad credit growth slowed further and is now the weakest in over a decade. … Bank Lending & Broad Credit …
12th June 2018
Import growth was surprisingly strong last month. This probably reflects a continued recovery in industrial activity following the easing of winter pollution controls and is unlikely to be sustained. Meanwhile, with global growth now past its peak, …
8th June 2018
The latest foreign exchange reserves data are consistent with very little PBOC action in the FX markets. This suggests that the recent resilience of the renminbi relative to other EM currencies reflects confidence in China’s economy and ability to manage …
7th June 2018
Rising global oil prices will put upward pressure on Chinese inflation over the next few months. But with food and core inflation both likely to edge down, we expect headline consumer price inflation to stay broadly stable over the rest of this year. … …
6th June 2018
China has reportedly fleshed out its offer to boost imports from the US. In return, the US is working on a deal to allow ZTE to resume operations and may call off the planned tariffs on Chinese goods. None of this will do much to narrow the bilateral …
The latest PMIs suggest that China continued to sustain rapid growth last month. But the surveys don’t tell the full story and have mostly defied a slowdown in the hard data during the past year. … Caixin Manufacturing PMI …
1st June 2018
The renminbi has weakened a little against the US dollar in recent weeks. But the Chinese currency has continued to appreciate in trade-weighted terms. Meanwhile, the Hong Kong dollar has bounced along the weak side of its trading band, triggering further …
31st May 2018
