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Credit growth starts to recover, private demand still weak Broad credit growth ticked up in July, while bank loan growth only slowed a touch. (See Chart 1.) We expect a continued acceleration in government bond issuance to support a further expansion of …
13th August 2024
Food prices drive up inflation but domestic demand remains weak Consumer price inflation ticked up in July, but this was entirely due to a weather-related rise in food price inflation. Producer price deflation was unchanged. While a ramp-up in fiscal …
9th August 2024
US recession risks yet to derail export outlook The recent batch of weaker-than-expected US data rattled global markets this week. But it hasn’t significantly altered China’s economic outlook. Admittedly, the risk of a US recession, which would hurt …
8th August 2024
Exports to stay robust, helped by NEER depreciation Growth in export values slowed last month, but this was mainly due to lower export prices. Export volumes remained near record highs. We expect outbound shipments to stay strong for a while, not least …
7th August 2024
Fears of a US recession have rattled EM equity markets at a time when EM economies themselves are showing more pronounced signs of weakness. Most EM currencies have held up well, suggesting a dovish tilt may come from EM central banks – particularly those …
5th August 2024
China’s economy has slowed recently but we think it will regain some momentum during the second half of the year. Consumers remain cautious and the housing market continues to weaken. But exports look set to stay strong for a while longer. And the …
2nd August 2024
We've been here before We wouldn’t take Tuesday’s pledge from the Politburo to tilt stimulus towards consumption at face value. The leadership called for policies to lift incomes and enhance the capacity and willingness of low- and middle-income groups to …
In its new urbanisation plan, China’s government is setting its targets low . The goal of reaching a 70% urbanisation rate in five years’ time could be met with far smaller increases in the urban population than have been seen in the past few years. And …
External demand no longer driving growth Hong Kong’s GDP growth slowed significantly in Q2, with activity expanding by just 0.4% q/q, down from a strong 2.3% q/q expansion in Q1, although this was slightly stronger than both we and the consensus expected …
31st July 2024
This report was first published on 31 st July covering the official PMIs. We added commentary on the Caixin manufacturing PMI on 1 st August and the Caixin services and composite PMIs on 5 th August. A poor start to Q3, but more policy support on its way …
Our China Activity Proxy suggests that the economy has lost some steam recently with weak domestic demand weighing on activity. Alongside recent rate cuts, policymakers have signalled that fiscal support will be ramped up soon, which should provide a …
30th July 2024
Leadership flags increased policy support but offers few new ideas The readout of the Politburo’s latest triannual meeting on economic affairs has just been published by state media. It was dovish in tone and adds to recent evidence that the leadership …
Growing drumbeat of support measures Policymakers’ concerns about the near-term outlook have become much more visible over the past couple of weeks. First, they took the unusual step of discussing the current economic situation in the Third Plenum …
26th July 2024
Surprise cut points to mounting policymaker concern The PBOC’s decision to cut the 1-year interest rate on its medium-term lending facility (MLF) earlier today is unusual for two reasons. First, the 20bp reduction is double the size of the PBOC’s usual …
25th July 2024
The complete Third Plenum “Decision” document provides interesting details on the leadership’s reform agenda across a range of areas. Overall though, it reinforces the central message in last week’s initial Plenum communiqué: Xi Jinping continues to place …
22nd July 2024
PBOC responds to leadership's call for more easing The PBOC has lowered its short-term policy rate for the first time since last summer, in line with our expectation for a cut this quarter. Its efforts to prevent long-term yields from falling therefore do …
GDP breakdown points to weaker services activity The lower-than-expected Q2 GDP figures released earlier this week suggest that China’s economy has lost some momentum recently. The detailed sectoral breakdown, published a day after the headline data, …
19th July 2024
China’s leadership has promised to continue comprehensively deepening reform in a wide range of areas. But there are few signs that the just concluded Third Plenum marks a major change in the direction of policymaking. And there still appears to be a …
18th July 2024
This page has been updated with additional analysis since first publication. Growth slowed last quarter but should regain some ground in H2 Weaker-than-expected official GDP figures show that China’s economy lost momentum in Q2. But we doubt this marks …
15th July 2024
PBOC tweaks policy framework The PBOC expanded its toolkit this week to help strengthen its day-to-day management of interbank rates. In addition to the repo operations it conducts each morning, mostly at 7-day maturities, the bank will also perform …
12th July 2024
Credit growth hits a new low Both bank loan and broad credit growth hit a record low in June. While further fiscal loosening may provide some support to credit growth in the near-term, the continued weakness of the property sector means that any increase …
This page has been updated with additional analysis since first publication Tailwind from strong exports set to persist Export values grew y/y at the fastest pace in 15 months, with export volumes hitting record highs. We think exports will stay robust in …
The continued weakness of the renminbi and the yen against the US dollar despite the narrowing of interest rate differentials via-a-vis the US is something of a conundrum, but our sense remains that both currencies will rebound against the dollar later …
11th July 2024
This page has been updated with additional analysis since first publication. Persistent overcapacity will keep inflation low Consumer price inflation edged down in June. Producer price deflation eased but this was entirely due to base effects. We still …
10th July 2024
Drop in long-term yields has made PBOC uneasy On Monday, the PBOC announced that it would start borrowing Chinese government bonds (CGBs) from primary market dealers (i.e. the major banks). While it didn’t elaborate further, the aim is clearly to shore up …
5th July 2024
Surveys likely understate health of manufacturing sector This report was first published on Monday 1 st July covering the official PMIs and the Caixin manufacturing PMI. We added commentary on the Caixin services and composite PMIs on Wednesday 3 rd July. …
1st July 2024
This page brings together our analysis of how Donald Trump's return to the White House will affect the outlook for emerging economies. Use the Table of Contents on the right to navigate. All of our analysis on the election, including the implications for …
28th June 2024
Supply-side reform won’t fix consumer weakness This week, the government published guidelines on creating “new consumption scenarios” with the aim of “coordinating the expansion of domestic demand while deepening supply-side structural reforms”. We’ve …
China’s economy has regained some momentum in recent quarters and should continue to do relatively well in the near-term. Consumers remain cautious, and a slew of policy measures aimed at supporting the ailing property sector has done little to boost new …
Overview – China’s economy is on course to expand by 5.5% this year, buoyed by policy support and strong exports. But we remain less sanguine about the medium-term outlook. Domestic Demand – A ramp up in fiscal spending should boost domestic demand in …
25th June 2024
Our China Activity Proxy suggests that economic growth weakened in May on the back of a fall in services activity. Industry also slowed, following months of outperformance. We doubt this marks the start of a downturn just yet – fiscal stimulus and strong …
24th June 2024
Bond buying redux PBOC Governor Pan Gongsheng this week again flagged the PBOC’s plans to start buying and selling government bonds and again argued that this wouldn’t constitute QE. (See our earlier discussion of the issue here .) The purpose of the new …
21st June 2024
The Third Plenum may conclude with a pledge of comprehensive reform in areas spanning the private sector, manufacturing, innovation, social security, economic management and more. That may excite hope of substantial change but, in the Party’s eyes, it has …
18th June 2024
Demand picks up while supply-side falters May’s activity data were a mixed bag with an uptick in retail sales and slowdown in industrial production partially reversing the recent trend of strength on the supply side and weaker demand. Consumer spending …
17th June 2024
Credit growth bottoming out thanks to fiscal support Bank loan growth in China was the slowest on record in May, but accelerated government bond issuance helped broader credit growth edge up. Fiscal loosening should support further gains in the near term. …
14th June 2024
Still a bright future in Europe China protested the European Commission’s (EC) imposition of additional tariffs on Chinese-made EVs this week but, if the EU goes no further, China’s government is likely to see this as a good outcome. The European tariffs, …
China’s rapid uptake of clean power means that it is on track to overachieve on its target of reaching peak carbon dioxide emissions before 2030. That said, the pace of decline will be slow at first, not least because it will probably take time for …
13th June 2024
This page has been updated with additional analysis since first publication. Producer prices will likely fall again soon due to overcapacity Producer prices picked up for the first time in eight months and consumer price inflation held steady in May. We …
12th June 2024
Trade barriers doing little to slow influx of goods Trade data published today showed that Chinese exports remained on a tear in May, rising 14.5% y/y in volume terms. This will add to concerns in Western countries about the influx of Chinese goods, which …
7th June 2024
This page has been updated with additional analysis since first publication. Exports set to remain robust in the near-term Export values rose y/y at the fastest pace since April 2023, with export volumes also picking up. We think exports will remain …
Global demand is giving a bigger boost to China’s economy than we had anticipated this year and foreign tariffs will make little difference to aggregate export performance in the near term. We now think that China’s economy will expand 5.5% this year as a …
4th June 2024
Government spending set to reaccelerate The official PMIs for May published today were disappointing. Taken at face value, they imply that the improvement in economic momentum earlier this year has stalled. One reason appears to be that government …
31st May 2024
This report was first published on Friday 31st May covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Monday 3rd June and the Caixin services and composite PMIs on Wednesday 5th June. Recovery still ongoing The PMIs for May …
China’s economy is expanding at a decent pace, with the manufacturing sector a key source of strength. The country has been increasing its global export market share, and it is unlikely that Biden’s new tariffs will do much to erode recent gains. A …
30th May 2024
Our China Activity Proxy suggests that economic momentum remains reasonably robust, fuelled by continued gains in manufacturing and a further recovery in services activity. A step-up in fiscal support and new property support measures may continue to …
Resolution of China’s property crisis would result in residential sales being substantially higher than today. Sales could rise by a third. But we wouldn’t expect prices to increase by much, if at all. And property construction activity will be weaker in …
24th May 2024
Pullback in deposit growth is not a bullish signal After picking up during the pandemic, growth in bank deposits has slowed sharply recently. (See Chart 1.) They even fell outright in April, by a record RMB3.9trn, though this may partly reflect …
Whilst export values of the “New Three” fell for the sixth consecutive month in y/y terms in April, export volumes remained close to their record peak. Meanwhile, the sharp drop-off in China’s exports of solar panels to India following the re-tightening …
20th May 2024
Property support ramps up The PBOC today announced major changes to property controls, including removal of regulatory floors for mortgage rates and a lowering of the minimum downpayment to 15% for first homes and 25% for second homes, 5%-pts lower than …
17th May 2024
Improving sentiment towards Chinese equities has sparked a further rebound over the past month, with stocks there having generally outperformed those elsewhere over this period. While we continue to see near-term upside, we think they will ultimately …
