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In the event of a trade war with the US, China’s response would go well beyond tariff increases. US companies would find their products and operations in China subject to tighter regulation that hampered their capacity to do business there. China’s …
17th November 2016
The latest data for industrial production and retail sales undershot expectations but a closer look at the underlying data on output volumes suggests that the recent recovery in economic activity has extended into Q4, helped by a rebound in private sector …
14th November 2016
The drop in new lending last month was seasonal and does not reflect a shift in broad credit growth, which was stable in October. This stability may not last, however, and we expect credit growth to decelerate further in coming quarters. … Bank Lending & …
11th November 2016
Hong Kong’s economy is currently growing close to trend, despite continued subdued growth in exports. The overheated property market remains the major concern, with the recent rebound in prices after a short-lived and small correction adding to risks. … …
Despite the threat of being hit with high tariffs and being labelled a currency manipulator, China will see benefits in the election of Donald Trump. In the near term, the dollar’s weakness against other major currencies should ease pressure on the …
9th November 2016
Consumer and producer prices are both rising at a comfortable pace, with worries over deflation fading into the distance. … Consumer & Producer Prices …
Imports continue to recover, helped by the recent strength of domestic demand, but exports remain subdued. With both global and domestic growth unlikely to accelerate much further, the medium-term outlook for Chinese trade remains challenging. … Trade …
8th November 2016
The biggest decline in the value of China’s foreign exchange reserves since the start of the year has more to do with movements in exchange rates and asset prices than sales by the People’s Bank. Capital outflows remain substantial but probably eased last …
7th November 2016
We expect consumer price inflation to have risen slightly last month but it should remain well within policymakers’ comfort zone. Looking ahead, while inflation may edge up in the short term, price pressures are set to ease further ahead as official …
4th November 2016
China’s overall fiscal stance has become increasingly loose in recent quarters on the back of a growing budget deficit and a renewed acceleration in off-budget borrowing by local government financing vehicles. With the economy now looking stronger, we …
Today’s better-than-expected PMI readings, which are the strongest in over two years, are a welcome sign that the recent cyclical recovery continued to gain momentum going into Q4. The caveat is that the strength remains primarily driven by more rapid …
1st November 2016
The renminbi dropped to a six-year low against the US dollar this month but it strengthened against most other currencies in the official currency basket. Meanwhile, although a jump in interbank rates at the end of October has triggered talk of policy …
31st October 2016
Earlier this month, the Chinese government sketched out how it intends to address the build up of corporate debt and the threat it poses to financial stability and China’s broader economic outlook. On the same day, it laid out a frame work for future …
28th October 2016
The Capital Economics China Activity Proxy (CAP) suggests that economic growthrose in Q3 to the fastest since 2014. However, with credit growth now starting toslow and the government taking steps to cool the property market, we think therecovery will run …
25th October 2016
According to our detailed estimates, capital flows out of China picked up last month. Global investors have regained some of their appetite for renminbi assets, but Chinese households and firms are moving money abroad at a faster pace. … Capital Flows …
24th October 2016
Dollar strength rather than renminbi weakness has been the main driver of the latest drop in the renminbi, which has taken it to its weakest against the US dollar in over six years. In trade-weighted terms, the renminbi has actually stabilised recently …
21st October 2016
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. Figures for Q3 show stronger activity in retail and real estate, both of which are being buoyed by looser credit …
20th October 2016
The official GDP figures remain too stable to tell us much about the performance of China’s economy. Our own measure of economic activity suggests that growth actually picked up in Q3. But with credit growth now slowing and policymakers moving to rein in …
19th October 2016
The jump in new lending last month was mostly seasonal and masks a drop in broad credit growth. We expect this slowdown to continue given further signs that the focus of policy makers has shifted away from growth concerns toward containing credit risks. … …
18th October 2016
Consumer price inflation rebounded last month but remains at a comfortable level. Meanwhile, producer price inflation returned to positive territory for the first time in over four years. … Consumer & Producer Prices …
14th October 2016
Advanced economies have been suffering from weak underlying demand, partly due to a mix of demographic and technological changes. Looking ahead, there is some scope for a rebound in private investment and governments may try to boost demand by loosening …
13th October 2016
The sharp rise in property prices over the past year, fuelled by a surge in mortgage lending, is clearly not sustainable and we expect a correction before long. This may not be the threat to financial stability that many fear. But it will result in a …
11th October 2016
The People’s Bank has taken a major step towards a more orthodox approach to monetary policy by adopting a de facto target for the interbank rate. Although this shift has taken place with little fanfare, it has important implications for how monetary …
10th October 2016
The value of China’s FX reserves declined further last month, as the People’s Bank continued to intervene heavily to shore up the renminbi. With few signs that capital outflow pressures are abating, the risks to the currency remain on the downside. … FX …
7th October 2016
Headline inflation likely rose last month on the back of a pick-up in food prices. But after a near-term rise, we expect price pressures to ease again further ahead. … Food prices drive inflation …
6th October 2016
With the renminbi on the cusp on joining the IMF’s SDR basket, the PBOC appears to have been working hard to hold it steady in recent weeks. Meanwhile, attention has been drawn to a pick-up in the 7-day repo rate, which the PBOC has begun to adopt as a …
30th September 2016
Today’s PMI reading suggests that the recent pick-up in activity may have extended into September, consistent with our forecasts for growth to have edged up in Q3. … Caixin Manufacturing PMI …
An across-the-board 45% tariff on imports from China may end up raising retail prices in the US by only 10%, and less still if Chinese policymakers responded by allowing the renminbi to weaken. With exports to the US driving only 3% of China’s GDP and few …
29th September 2016
The inclusion of the renminbi in the IMF’s SDR basket at the start of October will have minimal impact on foreign demand for renminbi assets and therefore offers little support for the Chinese currency. If anything, the risk is that official intervention …
26th September 2016
Growth in long-term loans to households, which consist mostly of mortgages, has jumped since early 2015 as the property market has heated up. In contrast, growth in other loans has slowed over the same period. At first glance, this suggests that credit …
23rd September 2016
The Capital Economics China Activity Proxy (CAP) suggests that growth accelerated further last month to the fastest since 2014. … Recovery …
21st September 2016
According to our detailed estimates, capital flows out of China were stable last month after rising slightly in July. Global investors continued to pull money out of the country, but Chinese households and firms amassed foreign assets at a slower pace. … …
20th September 2016
Banks, firms and households have all become more upbeat on the economic outlook recently, according to the latest People’s Bank surveys released over the weekend. In particular, households appear more eager to both consume and purchase property than at …
19th September 2016
A renewed pick-up in credit growth last month will add to the growing sense among investors that the near-term outlook for China’s economy is fairly bright. Credit growth is still likely to slow over the coming months as the PBOC refrains from further …
14th September 2016
Better-than-expected data out of China today raise hopes that policymakers’ efforts to reverse the slide in investment growth are seeing some success. … Activity & Spending …
13th September 2016
Inflation softened by more than expected last month but we think the decline will prove short-lived and doubt that it will spark further monetary easing by the People’s Bank. … Consumer & Producer Prices …
9th September 2016
A pick-up in export growth points to some welcome improvement in external demand while the sharp recovery in import growth hints at stronger domestic demand. … Trade …
8th September 2016
Consumer price inflation is likely to have fallen further in August, dragged down by a drop in food price inflation. But this will mask a continued pick-up in broader price pressures that is set to drive a rebound in inflation in the coming months. … Fall …
7th September 2016
Another drop in the value of China’s foreign exchange reserves points to continued intervention by the People’s Bank. It also suggests that capital outflows remain sizeable and so that the renminbi will stay under pressure in the coming months. … FX …
A number of voices have begun loosely using the term “liquidity trap” to argue that stronger credit growth in China has failed to provide a greater boost to output because firms are hoarding cash rather than spending it. But the money supply data being …
2nd September 2016
A number of commentators have recently drawn attention to a rapid rise in lending by the People’s Bank to domestic banks and suggested that this represents a form of stealth credit expansion or, alternatively, “backdoor QE”. In fact, it signals not a turn …
1st September 2016
For the first time since November 2014, both manufacturing PMIs are now at or above 50, the line that – in theory at least – separates expansion from contraction. This ought to boost sentiment and suggests that earlier policy easing is still being …
Data released today show home prices in Hong Kong rising for a fourth straight month in July, raising hopes that the city’s property market correction may be over. But with interest rates set to rise and the supply of housing likely to pick up, we think …
31st August 2016
The rally in China’s stock markets appears to be running out of steam. Meanwhile, further FX intervention by the PBOC has helped to keep the renminbi relatively stable against the US dollar, though it continues to weaken in trade-weighted terms. Market …
26th August 2016
The Capital Economics China Activity Proxy (CAP) points to a further acceleration in growth last month. Recent unusually hot weather may have played a part in lifting the CAP by giving a short-lived boost to the component measuring electricity demand. But …
25th August 2016
Private investment in China may not have slowed quite as rapidly this year as the official figures suggest. Nonetheless, the downward trend remains worrying and is likely to weigh on future growth. … Private investment slowdown overstated but still …
24th August 2016
Capital flows out of China accelerated in July to their fastest since February, according to our latest detailed estimates. The People’s Bank responded with heavier intervention so that, despite increase downward pressure, the renminbi stabilised after …
18th August 2016
Residents of the Yangtze River Delta (YRD) can look forward to unusually clear skies as restrictions on industry to limit pollution ahead of next month’s G20 summit come into effect. According to media reports, notices to shut or reduce output for two …
17th August 2016
Today’s approval of a link between stock markets in Hong Kong and Shenzhen may boost market sentiment and is a welcome signal that policymakers are keen to press on with financial reform as concerns over market volatility and capital outflows fade. But …
16th August 2016
Today’s GDP figures show that Hong Kong’s economy rebounded strongly in the second quarter. However, the economy faces a number of headwinds and we expect growth to slow again in the coming quarters as the city’s property sector downturn continues. … Hong …
12th August 2016
