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The tariffs announced today will cause difficulties for some firms exporting from China but will have a barely perceptible impact on China’s wider economy . The key uncertainty now is whether President Trump sees the them as an end in themselves, or …
22nd March 2018
For the second time since December, the People’s Bank has responded to a Fed rate hike by raising the rates it charges when providing funds in China’s interbank market. But contrary to perceptions, it is actually loosening monetary conditions at the same …
Our China Activity Proxy (CAP) suggests that growth has stabilised recently after a sharp slowdown since the middle of 2017. Economic conditions may improve in the near term as the government’s pollution crackdown is relaxed. But the resulting pick-up in …
Capital outflows edged up slightly in February in seasonally-adjusted terms, though they remain low. The PBOC again refrained from directly intervening in FX markets last month. But with the economy likely to slow this year and trade tensions rising, the …
21st March 2018
After 15 years at the helm of the People’s Bank, Zhou Xiaochuan is passing the title of governor to his protégé Yi Gang, a technocrat with two decades of experience at the central bank. Yi has been a strong proponent of Zhou’s efforts to tackle financial …
19th March 2018
The trade sanctions announced so far this year by the Trump administration on solar panels, washing machines, steel and aluminium have been inconsequential from China’s perspective: the US last year imported only around $6bn worth of these products from …
14th March 2018
Today’s data are broadly upbeat and suggest that the Chinese economy had a strong start to the year. But we expect growth to begin slowing again in the months ahead as the one-off boost to output from paring back pollution controls fades. … Activity & …
A sweeping overhaul of the structure of China’s government unveiled at the National People’s Congress today could improve financial regulation, reduce red tape for business, and boost productivity in agriculture, if implemented well. But the changes also …
13th March 2018
The amount of new loans issued by Chinese banks fell sharply last month. But this happens in February of almost every year. More important is that broader credit growth is now at multi-year lows. … Bank Lending & Broad Credit …
9th March 2018
Consumer price inflation rose sharply last month after a fall in January, boosted by a New Year-driven rebound in food price inflation. We think a further rise in food inflation will keep the headline rate elevated over the next few months. In contrast, …
The Hong Kong dollar has weakened this week to historic lows, though remaining within the narrow confines of its currency peg. But this is the result of ample domestic liquidity which has kept local interest rates low as those abroad have risen, and isn’t …
8th March 2018
The surge in export growth last month largely reflects the shifting timing of Chinese New Year. Of greater significance given the current climate of concern over US protectionism, China’s surplus with the US continues to increase. … Trade …
The resignation of Gary Cohn, reportedly one of the strongest proponents of free-trade policies within the Trump administration, has raised fears that US trade policy may now turn sharply towards protectionism. China would want to avoid a trade war with …
7th March 2018
China’s foreign exchange reserve figures suggest that the People’s Bank remained a minor player in the FX market last month. But its pledge to allow a more market-driven exchange rate will be tested if the renminbi comes under renewed pressure due to …
Following a fall in January, consumer price inflation will probably have jumped last month to a one-year high. We expect a further rise in food price inflation to keep the headline rate elevated over the next few months. But with the core rate broadly …
6th March 2018
China’s retention of an “about 6.5%” growth target for GDP in 2018, while expected, undermines the argument that growth is being demoted as a central policy concern. Growth is likely to slow we believe, not least because the finance ministry is today …
5th March 2018
China’s property sector has had a good couple of years and this has resulted in higher valuations for listed real estate developers. But the recent strength of land sales points, we think, to unrealistic expectations of likely demand in the years ahead. …
2nd March 2018
The survey data don’t offer a clear signal on the strength of factory activity last month. The Caixin manufacturing PMI was largely unchanged but the official index dropped sharply. The former is generally the more reliable guide to cyclical trends. But …
1st March 2018
Chinese stock markets have edged up recently following a slump in early February, likely supported by state buying. Meanwhile, the Hong Kong dollar has weakened against the US dollar and may soon run into the buffers of the HKMA’s exchange rate band. … …
28th February 2018
Hong Kong’s economy ended last year on a fairly strong note, supported by buoyant exports. But we think growth will slow over the quarters ahead. The expansionary budget unveiled today will provide some support to the economy this year. But it is unlikely …
A sharp decline in the official manufacturing PMI this month suggests that the survey data may finally be responding to the slowdown in growth shown on our China Activity Proxy late last year. And although a recovery looks possible in the short-run as the …
Our estimates show that outflow pressures eased at the start of this year after picking up in the fourth quarter. Foreign investors acquired Chinese financial assets at a more rapid pace last month while global firms stepped up their long-term investments …
27th February 2018
The removal of the two-term limit on China’s president is the clearest sign yet that Xi Jinping is reversing China’s reform era shift toward more institutionalised and rule-based politics. The quality of economic policy making is likely to suffer as a …
26th February 2018
One recent headwind to economic growth has been the government’s winter pollution crackdown in northern China, which has triggered numerous factory closures. This has had the desired impact of improving air quality but at the cost of limiting industrial …
14th February 2018
Chinese banks issued a record amount of new loans last month. But that happens at the start of almost every year. While the eye-popping new loan numbers will grab the headlines, the more important story is that broader credit growth has fallen to a new …
12th February 2018
The latest drop in consumer price inflation is largely seasonal and should reverse this month. The same cannot be said for the decline in producer price inflation, which points to a further easing in underlying price pressures. … Consumer & Producer …
9th February 2018
Today’s sharp move in the renminbi underlines the extent to which policymakers are keen to prevent the emergence of strong speculative pressures on the currency. … Policymakers pushing back on …
8th February 2018
Trade growth at the start of 2018 beat expectations by a wide margin. But seasonal volatility means that we won’t get a clear reading on the pace of shipments in and out of China until next month. … Trade …
China’s foreign exchange reserves data suggest that the People’s Bank has not been directly intervening to limit the renminbi’s recent gains against the dollar. That partly reflects the fact that the renminbi has strengthened much less against other …
7th February 2018
The usual pattern around Chinese New Year is for inflation to rise sharply either in January or February and fall in the other month. This year, we think inflation will have picked up in both. And rising food price inflation will probably keep the …
6th February 2018
The survey data suggest that output growth held steady at the start of 2018, with disruptions from the anti-pollution campaign starting to ease. But signs in the data of a slight softening in demand provide hints of what’s to come. … Caixin Manufacturing …
1st February 2018
The renminbi has now reversed all of its losses against the dollar since the day of the botched exchange rate reform in August 2015. We remain upbeat about the currency’s medium-term prospects but suspect that it is nearing a high-water mark for the time …
31st January 2018
While the survey data have yet to fully reflect the slowdown in growth shown on our China Activity Proxy, the latest decline in the official PMI does add weight to the view that the economy is cooling. … Official PMIs …
Although they have fallen in the last couple of days, Chinese equities are still up sharply this year so far. The renminbi has also appreciated against the US dollar, taking it back to where it was before the devaluation panic in early 2016. Moreover, …
30th January 2018
If the long-running skirmishes between the US and China were to escalate into a trade war, China would try to occupy the moral high ground by portraying itself as a defender of free trade. At the time though, officials would use a variety of means that US …
Our China Activity Proxy (CAP) suggests that economic conditions stabilised at the end of last year after a fairly sharp slowdown since the middle of 2017. Growth may pick up slightly in the near term as disruption caused by the pollution crackdown eases. …
25th January 2018
China’s bilateral trade surplus with the US rose in 2017 to a record high of US$275bn according to Chinese data. President Trump, according to the White House, stressed his “disappointment” with this imbalance in a call last week with President Xi and, on …
24th January 2018
The new US tariffs on imports of solar panels and washing machines may be aimed at China but look more like a continuation of the skirmishing of recent years than the first salvos of a trade war. … Trump still pulling his punches on China …
23rd January 2018
Capital outflows from China rose slightly in December as Chinese households and firms added to their foreign asset holdings. Looking at the year as a whole, capital outflows fell by 80% in 2017. … Capital Flows Monitor …
22nd January 2018
The detailed breakdown of China’s Q4 GDP data released today claims that stronger services activity, particularly in IT, fully offset a slowdown in construction and industry. While we don’t doubt that some parts of the service sector are doing well, we …
19th January 2018
Continued strength in foreign demand should help cushion some of the slowdown that we expect in China’s domestic economy this year. But it won’t prevent growth from weakening. … Will strong global demand support China in …
18th January 2018
Economic growth in China probably slowed last quarter, even though the official figures paint a picture of continued stability. … GDP (Q4) & Activity & Spending …
The slowdown in broad credit growth that has been underway since mid-2016 continued last month. Policymakers may welcome this progress toward deleveraging for now. But we think the drag on economic activity from slower credit creation will eventually …
12th January 2018
Export growth declined slightly last month but remained healthy. In contrast, import growth slowed sharply, raising questions over the state of domestic demand. Divergent prospects for growth in China and the rest of the world mean that export growth is …
A Bloomberg report that Chinese officials are considering halting purchases of US government debt triggered a sell-off in the US Treasury market today. In fact, China has not been buying US debt for most of the last few years. And, in practice, the …
10th January 2018
Inflation ended 2017 on a softer note, with a decline in both producer price inflation and non-food consumer price inflation. This is consistent with our view that cooling price pressures will open the door to monetary easing this year. … Consumer & …
We expect consumer price inflation to surge over the coming months on the back of a spike in food price inflation. However, with core inflation probably close to a peak and producer price inflation now falling, we don’t think officials will respond to the …
5th January 2018
The PMIs ended 2017 on a strong note. But if the past couple of quarters are any guide, this may not translate into an improvement in the hard data. And even if economic activity did pick up last month, the outlook for 2018 remains challenging. … PMIs …
2nd January 2018
With the People’s Bank last week tweaking the interest rates on its open market operations, it seems timely to highlight some of the peculiarities of China’s monetary policy framework. One key one is that, as the People’s Bank has still not made a full …
21st December 2017
Our China Activity Proxy (CAP) suggests that economic conditions stabilised in November but with growth much weaker than it was in the middle of the year. We expect a further slowdown during 2018. … Economy much cooler as year …
18th December 2017
