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The latest People’s Bank surveys show that conditions for banks, firms and households have all continued to improve this quarter. But while the general picture was positive, there were also some dark spots. Firms’ profitability and orders have weakened in …
22nd March 2017
We’ve revised up our 2017 growth forecast for China following the recent run of strong data. At the same time though, the latest figures on our China Activity Proxy (CAP) suggest that the acceleration that has been underway since this time last year has …
There is little doubt that Carrie Lam, the former head of Hong Kong’s civil service and the candidate preferred by Beijing, will be chosen on Sunday as the city’s next chief executive. But she won’t have popular support and will inherit an economy facing …
According to our latest detailed estimates, China witnessed a net inflow of capital last month for the first time in almost three years. Tighter capital controls and seasonal factors helped drive this reversal. But more important may have been an easing …
17th March 2017
People’s Bank Governor Zhou Xiaochuan made clear at the National People’s Congress that the trend would be towards further monetary tightening over coming months. So today’s decision by the PBOC to raise the interest rates it charges on reverse repos was …
16th March 2017
The People’s Bank has followed the Fed in raising the interest rate it charges when providing funds in China’s interbank market. But we believe that tighter policy in China continues to be primarily driven by efforts to tackle domestic credit risks, not …
Premier Li Keqiang’s remarks to the press today following the conclusion of the National People’s Congress reinforce our view that policymakers will allow a renewed slowdown in economic growth this year but won’t shift course on exchange rate policy. They …
15th March 2017
The latest reports and official comments from the National People’s Congress suggest that progress on reducing overcapacity and state sector reforms will remain sluggish this year. Unless policymakers act more decisively soon, we expect economic growth in …
14th March 2017
A jump in infrastructure spending and strong property sales have helped sustain China’s recovery into early 2017. Both these tailwinds look likely to run out of steam in the coming quarters, however, as policy support is pared back and a correction in …
In his annual outing before the press at the National People’s Congress today, People’s Bank Governor Zhou Xiaochuan made a strong case that policy support for the renminbi can be sustained in the face of market pressure. In fact, he argued that sales of …
10th March 2017
Bank lending in China held up better than expected last month but at the expense of other forms of credit, which have become less attractive following the recent rise in market interest rates. … Bank Lending & Broad Credit …
9th March 2017
Producer prices rose at their fastest pace since 2008 last month. But consumer price inflation remains well below the government’s 3% threshold. … Consumer & Producer Prices …
The latest trade data suggest that, seasonal distortions aside, both exports and imports strengthened at the start of 2017. … Trade …
8th March 2017
The rise in China’s foreign exchange reserves last month suggests that the People’s Bank purchased foreign exchange in February and that capital outflows stalled. But the picture is murkier than usual around Chinese New Year, when port and bank closures …
7th March 2017
Following a spike in January to a near-three-year high, consumer price inflation is likely to have fallen last month to a six-month low. This should be the nadir for inflation this year. Looking ahead, once the volatility around Chinese New Year has …
6th March 2017
Official statements at the National People’s Congress suggest policymakers feel less urgency to support growth than a year ago and are instead attempting to address credit risks by tightening monetary and fiscal policy. There is little sign, however, that …
We estimate that sectors responsible for two-thirds of China’s industrial output now suffer from overcapacity. Despite this, policymakers continue to drag their feet on reform due to fears that deep capacity cuts would cause a rise in lay-offs and an …
1st March 2017
February’s PMI readings suggest that the recent pick-up in global demand is keeping China’s recovery mostly intact for now. … PMIs …
Chinese equities started the Year of the Chicken on a bright note, rising in February by the most in three months. Meanwhile, the PBOC has continued to tighten monetary conditions by pushing market interest rates higher. … Equities hit three-month …
28th February 2017
The annual meeting of China’s parliament, the National People’s Congress (NPC), starts soon. While the NPC meeting typically includes little in the way of policy announcements, it should nonetheless give us a better of the government’s priorities and …
24th February 2017
Today’s GDP figures show that growth in Hong Kong strengthened further at the end of last year on the back of a jump in exports. But while the economy should continue to perform well in the first half of 2017, helped by the supportive budget unveiled …
22nd February 2017
Recent data provide further evidence that China’s moves to tighten capital controls are having an effect. According to our detailed estimates, outflows last month were the smallest since August despite a sharp reversal of foreign portfolio inflows …
Despite major swings in the wider economy over the past two years, growth in consumer spending appears to have been relatively stable. The latest data on retail sales in the Chinese New Year period suggest this trend continues. Spending during the holiday …
15th February 2017
The huge increase in net new lending in China last month was seasonal. Growth in outstanding loans actually slowed to a ten-year low in January. Broad credit growth also slowed last month and is set to decelerate further in the months ahead. … Bank …
14th February 2017
Consumer and producer price inflation both accelerated last month. But we expect both to peak soon and think hopes for a sustained reflation in China will be disappointed. … Consumer & Producer Prices …
China’s relationship with the US has so far been less fraught than had seemed likely immediately after President Trump’s election victory. Tensions are likely to flare up at some point but the most worrying downside scenarios for China’s economy look less …
10th February 2017
Headline trade growth jumped in January. Seasonal factors played a large part but underlying demand also appears to have strengthened. … Trade …
A further rise in producer price inflation, which probably hit a fresh five year high in January, is likely to fuel concerns about a pick-up in broad price pressures this year. But we think consumer price inflation will have peaked last month. … Inflation …
8th February 2017
China’s foreign exchange reserves are now worth less than $3trn for the first time since 2011. That said, they remain sufficiently large not to warrant any immediate concerns over the sustainability of exchange rate intervention by the People’s Bank, …
7th February 2017
The People’s Bank has raised the interest rate that it charges when providing funds in China’s repo market. This is the clearest evidence so far that monetary policy is being tightened and that supporting growth is no longer the primary immediate goal of …
3rd February 2017
Today’s Caixin manufacturing PMI reading was less upbeat than the official PMI reading published a couple of days ago and suggests that the Chinese economy, while still holding up well, may have lost some momentum at the start of 2017. … Caixin …
Today’s PMI readings suggest that China’s economy continued to perform well last month, though we doubt the current strength will be sustained for much longer. … Official PMIs …
1st February 2017
The renminbi appreciated against the US currency this month for the first time since October, helped by a tightening of capital controls. But in trade-weighted terms, the Chinese currency has been broadly stable for half a year. Meanwhile, China’s two …
31st January 2017
China’s current account surplus is no longer unusually large. But its surplus in traded goods is substantial, particularly relative to the size of the global economy, and the bilateral imbalance with the US remains huge. That will be enough to keep it in …
27th January 2017
China’s moves to tighten capital controls are seeing some success. According to our detailed estimates, outflows last month were the smallest since August thanks to a sharp pull-back in outbound direct investment. Policymakers aren’t out of the woods …
26th January 2017
The Capital Economics China Activity Proxy (CAP) suggests that growth accelerated for a ninth consecutive month in December to the fastest in more than three years. For the first time since 2011, our estimate of growth is no weaker than that shown by the …
24th January 2017
In contrast to China’s remarkably stable GDP figures, data on the labour market corroborate evidence from elsewhere that the economy strengthened in recent quarters. China created over 13 million new urban jobs last year, more than in 2015 and easily …
23rd January 2017
China’s GDP data are widely maligned. But one area where the figures are useful is in the detail they provide on the service sector. The full breakdown published over the weekend points to broad based strength at the end of 2016, including pick-ups in …
GDP growth edged up last quarter, though few still take the official figures at face value. Our own measure of economic activity points to a much more pronounced recovery but one that is unlikely to be sustained for long. … GDP (Q4) & Activity & Spending …
20th January 2017
China will need to let the renminbi float at some stage if it intends to push ahead with plans to liberalise the capital account and encourage greater international use of the currency. But, recent speculation aside, this isn’t likely in the foreseeable …
17th January 2017
A strong end to the year for global manufacturing failed to prevent a decline in Chinese trade growth last month. … Trade (Dec.) …
13th January 2017
Bank lending in China jumped last month as higher bond yields encouraged firms to turn to banks rather than capital markets for funding. However, broad credit continued to slow. … Bank Lending & Broad Credit …
12th January 2017
A drop in food inflation pulled down headline consumer price inflation in December. We expect it to leap in January, but the increase is unlikely to be a major concern for policymakers. … Consumer & Producer Prices …
10th January 2017
Headline inflation probably fell in December. But looking ahead, we think both consumer and producer price inflation are set to jump this quarter on the back of a surge in commodity price inflation, with CPI inflation hitting a three-year high. … …
9th January 2017
The value of China’s foreign exchange reserves fell by 10% in 2016 as the People’s Bank fought to prevent a disorderly decline in the renminbi. With the level of reserves still well above most estimates of what the PBOC needs to keep control of the …
The year has started with another wave of stories about capital flooding out of China, alongside an unusually sharp strengthening of the renminbi. The currency gain over the past couple of days was the biggest since last February (see Chart 1), when the …
5th January 2017
The Capital Economics China Activity Proxy (CAP) suggests that the economy has continued to accelerate sharply. In fact, we estimate that output is currently expanding at a pace not too far short of the official growth rate of GDP. But with policy support …
22nd December 2016
China is ending 2016 on a stronger footing economically but with growing strains in its financial markets. A slight tightening of monetary conditions has snowballed into a bond market sell-off, with stresses compounded by official efforts to support the …
Chinese bond yields have jumped in recent weeks as strong economic activity and rising inflation have led many to anticipate monetary tightening. Yields may have risen too far. The latest surge in producer prices has surprised many but doesn’t appear to …
14th December 2016
The jump in new lending last month was largely seasonal. Broad credit growth did pick up slightly but the increase was small and is unlikely to elicit a major policy response. … Bank Lending & Broad Credit …
