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Market interest rates in Hong Kong have jumped recently, reaching a nine-year high of 1.3% after the Fed’s rate hike this week. The unusually large spread between HK and US interbank rates that has persisted through most of this year has halved since …
15th December 2017
The People’s Bank has raised the rates it charges when providing funds in China’s interbank market. But unlike in the US, the move seems unlikely to result in higher short-term funding costs for most banks. … The PBOC pretends to follow the …
14th December 2017
Stronger exports and an uptick in investment failed to prevent a further slowdown in industrial output growth last month as disruptions to factory activity from the pollution crackdown continued to bite. … Activity & Spending …
New lending jumped last month but this masks a further slowdown in underlying credit growth. Despite the official rhetoric on the need to deleverage, we think the drag on economic activity from this slowdown in credit creation will eventually trigger a …
11th December 2017
Chinese trade growth surprised to the upside in November, with strong external demand more than offsetting the drag from base effects. That said, domestic demand may not be quite as strong as the import figures suggest and still looks set to weaken in the …
8th December 2017
We expect a spike in food price inflation to push headline CPI inflation up sharply over the months ahead. But with core inflation unlikely to pick up much further and PPI inflation set to fall, policymakers will look through the rise in the headline CPI …
7th December 2017
China’s foreign exchange reserves suggest that capital outflows continued to be a non-issue last month. This has allowed the PBOC to step back from FX intervention which, over the medium term, should be supportive of renminbi appreciation. … FX Reserves …
As US tax reform nears the finishing line, some in China are warning that the cut to US corporate tax rates could undermine China’s competitiveness and spur capital outflows. We think these concerns are overdone but they have bolstered the case of those …
6th December 2017
We’ve revised down our forecast for China’s growth next year on the back of the weakness in recent data. There will be little movement in the official GDP growth numbers but we now expect actual growth of 4.5% in 2018, compared with the above-trend 6.0% …
5th December 2017
Today’s Caixin PMI reading paints a less upbeat picture than the official surveys and suggests that economic activity probably cooled slightly last month. We expect further softness ahead, which will be amplified in the year-on-year growth figures by …
1st December 2017
Chinese equities have fallen back from recent highs after regulators spooked investors by tightening restrictions on online lending. But we don’t think a slump is likely. Meanwhile, corporate bond yields rose this week to the highest since 2014. If we’re …
30th November 2017
China’s property sector is crucial to the economy’s performance and to China’s demand for many materials. In this Focus, we discuss the drivers of the property cycle and answer the key questions on affordability, over-investment, demographics and …
The official PMIs continued to hold up well this month. But they have been a poor guide to recent trends, failing to reflect the deceleration in economic growth shown on our China Activity Proxy. Looking ahead, we expect this slowdown to deepen as the …
Our China Activity Proxy (CAP) suggests that economic growth slowed for a third month in succession in October, dropping to the weakest pace in over a year. With property curbs biting and credit growth declining, we expect the economy to soften further …
23rd November 2017
Official talk about prioritising the “quality” of economic growth over speed has sparked speculation that the government may stop setting GDP targets. Unfortunately we think they are here to stay. GDP targets have been central to China’s economic policy …
22nd November 2017
After seeing net capital inflows in September for the first time in 2014, we think outflows will have returned last month as Chinese investors acquired foreign assets at a faster pace and inbound foreign direct investment slowed. But the big picture is …
17th November 2017
The October data available so far suggest that China’s economy is starting to slow after growing at a rapid pace through most of this year. Real investment and property sales were both lower last month than a year before. Industrial production growth was …
15th November 2017
While official figures show a small deceleration in industrial output growth last month, our own measure points to a much shaper decline. Meanwhile, the are signs in the rest of today’s data that the downturn in the property sector is weighing on …
14th November 2017
Higher market rates are driving a slowdown in credit growth that is set to weigh on economic activity in coming quarters. Weaker incoming data should keep the PBOC from tightening policy any further. … Bank Lending & Broad Credit …
13th November 2017
Today’s announcement that China is removing foreign ownership restrictions in its financial sector is encouraging but it is unclear when this will happen. It is also unlikely that foreign-owned firms will be allowed to compete freely with Chinese-owned …
10th November 2017
We think it’s on borrowed time but the still-buoyant property market supported another quarter of strong household spending for Hong Kong in Q3 which helped offset weakness elsewhere in the economy. … Hong Kong GDP …
Higher-than-expected inflation last month means that the China reflation story remains alive for now. But with the economy set to soften in the coming quarters and current price gains partly the result of temporary disruptions from the pollution …
9th November 2017
A shift in the timing of the Mid-Autumn Festival explains much of the decline in headline trade growth in October. But even after accounting for seasonal factors, trade volumes have edged down recently, suggesting that both foreign and domestic demand is …
8th November 2017
The stability of China’s foreign exchange reserves last month masks a pick-up in FX purchases by the People’s Bank (PBOC). We believe this intervention is aimed at creating uncertainty over the short-run direction of the currency rather than at resisting …
7th November 2017
Core inflation rose in September to six-year high, as rapid economic growth and a tight labour market continued to drive a pick-up underlying price pressures. But with growth soon likely to slow again, the People’s Bank is likely to look through further …
We expect CPI inflation to have rebounded in October driven by a rise in food price inflation. The core rate, which hit a six-year high in September, will likely have edged up too. Looking ahead, a slowdown in economic growth should keep a lid on price …
3rd November 2017
Today’s unofficial PMI reading suggests that the economy may have held up better in October than yesterday’s official PMI readings initially suggested. But this is unlikely to prevent year-on-year growth from slowing this quarter as a result of …
1st November 2017
China’s economic recovery has put its air quality targets in jeopardy Urgent remedial action is being taken but this will hit growth in coming months In upcoming events: Economic issues come second to North Korea in Trump visit A crackdown on …
31st October 2017
The latest official PMI readings suggest that growth momentum weakened this month. With fiscal support likely to be reduced now that the Party Congress is over and the environmental crackdown set to intensify, we anticipate a further slowdown in the …
China’s government bond yields have risen over the past week as state funds have stopped propping up the country’s bond prices after the Party Congress. But with the PBOC likely to keep short-term interest rates stable in coming months rather than push …
30th October 2017
The latest data on retail sales during China’s National Day “Golden Week” period suggest that consumer demand remains strong. Despite a further increase in overseas tourism during the holiday, domestic spending was 10.3% higher than last year, only …
26th October 2017
As expected, Xi was able to stack China’s top leadership group with close allies. Furthermore, he left the door open to staying on beyond 2022 by not anointing a successor. Unfortunately, there are few signs that Xi plans to use his increased power to …
25th October 2017
Our China Activity Proxy (CAP) suggests that growth in China slowed last month to the weakest pace in a year. Looking ahead, with property sales cooling and officials continuing their efforts to rein in financial risks, we think the economy will slow …
24th October 2017
Wang Qishan was not among the members of the new central committee announced today, ending speculation that retirement norms would be broken so that he could keep his position, possibly as a precursor to Xi himself staying on beyond 2022. But with Xi …
The detailed breakdown of China’s Q3 GDP data released today shows a slowdown in industry and construction that was offset by stronger activity in the financial and information technology sectors. Looking ahead, with credit growth slowing and expanding …
20th October 2017
Our estimates show that China saw a net inflow of capital last month, albeit a very small one, for the first time since 2014. Foreign investors acquired Chinese financial assets at the fastest pace in a year, while high local interest rates have driven …
Both the official figures and our own China Activity Proxy suggest that growth held up well last quarter, and so did the monthly activity data in September. However, a less supportive fiscal policy stance and slower credit growth should result in a …
19th October 2017
The Party Congress kicked off today with the Report delivered by Xi Jinping. His ability to emphasise his contributions to Communist Party doctrine over those his predecessors hints at a successful consolidation of power. However, there were no signs in …
18th October 2017
Core inflation rose to a near six-year high last month and producer price inflation continued to rebound, consistent with resilient growth ahead of the Party Congress. But the credit data suggest that tighter monetary conditions are weighing on lending, …
16th October 2017
A slump in home sales in China’s major cities during the National Day holiday has grabbed many headlines this week. But this weakness isn’t a new development. Home sales in big cities have been falling for some time. Looking ahead, as the government …
13th October 2017
Seasonal factors helped to boost year-on-year trade growth last month. But there are also hints of a real pick-up in domestic demand, perhaps due to efforts to shore up activity ahead of the Party Congress. … Trade …
The upcoming Party Congress will deliver a major reshuffle of China’s leadership and determine President Xi Jinping’s ability to implement his policy priorities over the next five years. In this report, we provide an overview of how the Congress will …
11th October 2017
Reform implementation is likely to accelerate after the Party Congress, particularly if President Xi emerges in a stronger position. But given Xi’s reluctance to relinquish state control over key parts of the economy, China’s structural problems are …
10th October 2017
The small rise in China’s foreign exchange reserves last month is consistent with muted capital outflows but hints at active intervention by the People’s Bank to inject two-way volatility into the exchange rate. … FX Reserves …
9th October 2017
We expect consumer price inflation to have fallen in September as a shift in the timing of Mid-Autumn Festival probably caused a drop in food price inflation last month. This will reverse in October and food inflation is likely to rise further in the …
6th October 2017
The People’s Bank gave its devotees a twinge of nostalgia on Saturday as it announced a cut to reserve requirements out of office hours and at the start of a national holiday in China. This was how monetary policy announcements used to be made. But the …
2nd October 2017
Many had been expecting policymakers to focus on stability above all else in financial markets in the run-up to the October Party Congress. But they this week allowed the renminbi to weaken sharply both against the dollar and in trade-weighted terms. …
29th September 2017
Our China Activity Proxy (CAP) suggests that growth in China remained strong last month, driven by healthy domestic demand. But as officials continue their efforts to rein in financial risks and with fiscal support now being withdrawn, we don’t think this …
26th September 2017
S&P is the third of the three major ratings agencies to downgrade China and today’s decision tells us nothing we didn’t already know. There has actually been some progress recently in tackling credit risks, particularly in reining in the activities of the …
21st September 2017
Some have pointed to a rise in home sales and housing starts growth in August as evidence that China’s property sector is holding up well despite the government’s curbs. But while the property sector has not crashed this year, it has cooled significantly. …
19th September 2017
