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In seasonally-adjusted terms, capital outflows fell to a three-year low last month as Chinese firms and individuals reduced their foreign currency deposits at the fastest pace in half a year. Looking ahead, while outflows are likely to persist, we think …
18th September 2017
New lending rose in August, but this masks a decline in underlying credit growth, which has trended down during the past year. A further slowdown appears likely given the government’s current campaign against financial risks. … Bank Lending & Broad Credit …
15th September 2017
The activity and spending data for August all came in below expectations. The main culprit was a slowdown in infrastructure investment, which also weighed on industrial output. We expect further weakness ahead, as fiscal policy becomes less supportive and …
14th September 2017
With President Xi already firmly in charge of setting the government’s economic agenda, we don’t anticipate any major changes in policy goals after next month’s Party Congress. That said, a stronger Xi would be better placed to speed up the implementation …
13th September 2017
President Xi is widely expected to consolidate his power over the Party and over policy at the Party Congress next month. Politics is extremely opaque at elite levels in China and we won’t have any definitive answers even when the meeting has finished. …
12th September 2017
We don’t believe that officials at the People’s Bank are so acutely sensitive to the level of the exchange rate that they are now worried about renminbi strength – it has barely moved in trade-weighted terms. But now that depreciation pressure has abated, …
11th September 2017
Export growth slowed by more than anticipated last month. Unfavourable base effects appear largely to blame. Nonetheless, outbound shipments remain softer than in Q2. Inbound shipments have held up better but are being buoyed by an unsustainable rise in …
8th September 2017
A rise in China’s foreign exchange reserves suggests that the People’s Bank may have become a net buyer of FX last month for the first time since 2015. This would signal that the central bank’s concerns about capital outflow pressures are being replaced …
7th September 2017
Anticipation is building ahead of next month’s Party Congress, which is widely seen as a potential watershed in policymaking if it results in President Xi successfully consolidating his power. The first evidence of how successfully he has been in …
Consumer price inflation probably rose last month to the highest since January, driven by a further rebound in food price inflation. But taking a step back, inflation is still fairly subdued and we think it will remain so over the months ahead. … …
5th September 2017
President Trump’s suggestion that he would cut off all trade with countries that trade with North Korea is an empty threat when it comes to China. But the risk of some form of trade sanction has increased. … Trade tensions rise after North Korea’s …
4th September 2017
Stronger manufacturing PMI readings for August suggest that industrial output remains resilient. However, momentum elsewhere in the economy has weakened. … Caixin Manufacturing PMI …
1st September 2017
The renminbi’s strong gains against the dollar over recent weeks caught many by surprise, and most think they will reverse before long. By contrast, we believe there is a good chance that appreciation will continue over the next couple of years. In this …
31st August 2017
The latest official PMI readings suggest that China’s manufacturing activity may have strengthened in August but point to weaker momentum in the rest of the economy. … Official PMIs …
The renminbi’s continued strength against the US dollar this month has forced us to update our forecasts. The Hong Kong dollar, by contrast, has declined to record lows against the US currency and may soon trigger intervention from the HKMA. … A tale of …
29th August 2017
In contrast to the weaker official activity data for July, our China Activity Proxy (CAP) suggests that growth in China picked up last month to the fastest pace in nearly four years. However, as officials continue their efforts to rein in financial risks, …
28th August 2017
While other currencies have recently been rising against the US dollar, the Hong Kong dollar has been sliding to historic lows, albeit within the narrow confines of its currency peg. This is the result of ample domestic liquidity which has kept local …
24th August 2017
Net capital outflows from China edged up in July, but this was due to seasonal factors. Adjusting for these, outflows actually eased last month to a five-month low, helped by more rapid foreign investment into the country. Looking ahead, while outflows …
21st August 2017
Official data published on Monday show that commercial banks’ non-performing loan (NPL) ratio held steady at 1.74% in Q2 and that their net profits grew almost 12% y/y, the fastest pace since 2014. That said, we think it would be a mistake to conclude …
16th August 2017
New lending declined in July, masking an uptick in underlying credit growth. We doubt this will translate to a sustained pick-up, however, since efforts to slow the build-up of debt mean that market rates should remain elevated in coming months. … Bank …
15th August 2017
The activity and spending data for July all came in below expectations, reversing most of improvement seen at the end of Q2. Nonetheless, industrial production still looks unsustainably strong given the growing headwinds to investment growth from policy …
14th August 2017
Hong Kong’s economy continued to expand at a rapid pace in Q2, driven by strong household spending and investment. But we think GDP growth will slow in the second half of the year. The recent strength in capital spending won’t last. The city’s overheated …
11th August 2017
Rising steel prices aside, broader price pressures appear to have cooled last month. We expect the reflation of the past year to continue to fizzle out in coming quarters as policy tightening dampens economic activity. … Consumer & Producer Prices …
9th August 2017
Chinese trade softened at the start of Q3, with a slowdown in commodity imports suggesting that policy tightening may be weighing on investment spending. … Trade …
8th August 2017
Consumer prices appear to have risen at their fastest pace last month since February, driven by a rebound in food inflation. Even so, consumer price inflation remains muted and is unlikely to pick-up much further this year, while producer price inflation …
7th August 2017
China’s foreign exchange reserves suggest that outflow pressures eased further last month, which seems to have encouraged the People’s Bank to halt its FX sales entirely. This shift is helping to support the renminbi, which we think will continue to …
The prospect of a property downturn triggered by monetary tightening in the US has long been the biggest risk hanging over Hong Kong’s economy. But while US interest rates have risen this year, rates in Hong Kong have actually declined. This respite will …
4th August 2017
Yesterday’s official PMI reading had hinted at a softer start to Q3. But today’s unofficial PMI suggests that manufacturing activity has held up better than previously thought and points to a pick-up in economic growth last month. … Caixin Manufacturing …
1st August 2017
There has been a fresh push recently on state sector reform but no sign that policymakers are willing to tackle the underlying reasons why state firms perform poorly. … State sector reform continues to …
31st July 2017
The latest official PMI readings suggest that China’s growth momentum may have waned at the start of Q3 as foreign demand cooled. … Official PMIs …
The Hong Kong dollar has continued to slide against the US dollar in recent weeks and may soon run into the buffers of the HKMA’s exchange rate band. The renminbi, by contrast, has been appreciating further against the US currency. This trend, we think, …
27th July 2017
Our China Activity Proxy (CAP) shows that growth in China remained strong in Q2, although our new seasonally-adjusted data point to a marked slowdown in momentum since the start of the year. … Growth stable in Q2, but momentum …
25th July 2017
Net capital outflows from China were broadly unchanged in June as greater inflows from foreign investors helped to offset increased outflows due to Chinese investment overseas, including in Belt & Road countries. China’s growing appetite for foreign …
21st July 2017
The resilience of home sales in China (up 18% y/y in June) has raised questions about the effectiveness of government efforts to cool the sector, which have been stepped up in recent months. In fact, they seem to have been performing well. The major …
19th July 2017
The detailed breakdown of China’s Q2 GDP data that has just been released suggests that a tougher regulatory environment is weighing on service sector growth. So far the drag has been mild but it may intensify in coming quarters given signals from China’s …
18th July 2017
Relatively few substantive decisions appear to have been made at the National Financial Work Conference but statements about the need to limit financial risks are significant. They suggest that the tighter regulatory oversight of credit in recent months …
17th July 2017
Both the official GDP figures and our own measure of economic activity suggest growth held up well last quarter, with more timely data showing few signs of a slowdown heading into Q3. That said, we think it is only a matter of time before the government’s …
Another widening of the renminbi’s trading band is now a distinct possibility, following hints in a PBOC-run newspaper earlier this week. But such a move would make no difference to the trajectory of the currency unless combined with broader changes to …
14th July 2017
Chinese trade ended Q2 on a positive note but headwinds remain. In particular, while the slowdown in import growth appears to have eased recently, policy tightening means that the current resilience of domestic demand is unlikely to be sustained. … Trade …
13th July 2017
New lending rose by more than anticipated in June. But this masks a continued slowdown in underlying credit growth which will start to weigh on economic activity before long. … Bank Lending & Broad Credit …
12th July 2017
In June, core consumer price inflation hit its highest level, Chinese New Year aside, since 2011. And after falling since February, producer price inflation stabilised. But with economic activity set to cool in the coming quarters, we think current …
10th July 2017
China’s foreign exchange reserve figures for June suggest that, having eased markedly since the start of the year, capital outflow pressures remained muted last month. We think this shift could prove durable, with the renminbi performing better than …
7th July 2017
Earlier this week, the People’s Bank vowed to do more to regulate asset management products. While it is wise to seek to defuse the risks from these products sooner rather than later, doing so without triggering financial volatility will be no easy feat …
6th July 2017
We think headline inflation will have risen in June to a five-month high on the back of a further rebound in food price inflation. Looking ahead, while we don’t expect consumer price inflation to rise further in the coming months, heavy flooding across …
China’s stimulus-driven recovery is over. Key risks, in particular around the currency, have dissipated, so the coming slowdown should be mild. But the economy’s structural problems are not being addressed. Prospects for growth further ahead are therefore …
3rd July 2017
The Bond Connect scheme launched today creates a new channel for foreigners to invest in China’s onshore bond market. If previous steps to expand market access are any guide, however, the move will do little to boost inflows. These are being held back by …
Today’s PMI reading suggests that growth in China may have edged up at the end of Q2. Nonetheless, it is still consistent with more subdued economic activity than during much of the past few quarters. Meanwhile, slowing credit growth and tighter monetary …
Chinese equities ended June at a two-month high, likely supported by state buying. Increased intervention by officials also appears to have been responsible for the renminbi’s recent appreciation against the US dollar. Meanwhile, monetary conditions …
30th June 2017
Efforts to curtail off-budget borrowing by local governments have recently helped slow the rise of China’s public debt ratio. But a further rise in government debt is almost certain in future as it eventually foots the bill for the still-rising bad debts …
The official manufacturing PMI continues to point to robust economic growth. But the data should be taken with a large pinch of salt given that the index has recently diverged with more reliable measures which suggest that momentum has eased. … Official …
