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The inept response by China’s policymakers to the pressures of the last few months has rightly diminished confidence in their ability to handle the structural transition China faces in the years ahead. But there is little evidence that the economy is …
17th February 2016
Today’s data point to a sharp acceleration in credit growth going into 2016. This is consistent with our view that growth is more likely to pick up than slow over the coming quarters. … Bank Lending & Broad Credit …
16th February 2016
Swings in food prices around Chinese New Year will have caused inflation to jump in January. This pick-up may partly reverse this month but the bigger picture is that inflation still looks set to rise this year. … Food prices surge ahead of Spring …
15th February 2016
The idea that the People’s Bank is running out of FX reserves doesn’t stand up to scrutiny. But the fact that many take it seriously is a sign of how far sentiment has swung against China. … PBOC still far from exhausting …
Today’s trade figures make for gloomy reading. But things may not be as bad as they look. Commodity import volumes remained resilient and we suspect that at least some of the weakness in the data reflects distortions due to Lunar New Year and illicit …
A renewed acceleration in credit growth has brought concerns about a Chinese debt crisis back to the fore. Investors are right to be worried: dealing with the unsustainable build-up of debt is one of the biggest long-run challenges that policymakers face. …
11th February 2016
Many countries facing balance of payments strains have found that large outflows continue even after they tighten capital controls. China though stands a better chance of success. The capital account was only partially open to begin with. Experience …
4th February 2016
If the economy doesn’t show signs of a turnaround in coming months, we would have to downgrade our relatively upbeat view of China’s economic prospects. But we would need to see evidence of clear economic deterioration to believe that markets are …
1st February 2016
Today's manufacturing PMIs offer conflicting signals on the state of the economy going into 2016. On balance though, they suggest conditions remained subdued but broadly stable last month. … PMIs …
Chinese equities have already lost nearly a quarter of their value so far this year. Meanwhile, the renminbi is once again tracking the dollar closely and skirting the weak edge of its apparent trade-weighted band. Other things equal, the latest weakness …
29th January 2016
Our China Activity Proxy (CAP) suggests growth slowed sharply at the start of 2015 and ended the year without seeing much of a recovery. That said, growth does appear to have stabilised rather than continued to slow, as many believe. We remain more upbeat …
27th January 2016
Markets appear convinced that China is in the midst of an economic crisis. Yet even on the basis of our relatively downbeat measure of China’s growth, it remains one of the world’s fastest-growing economies. … China, growth …
25th January 2016
Evidence that China’s labour market stayed strong last year should provide some respite from concerns that the country’s economy is collapsing. China created over 13 million new urban jobs in 2015, easily exceeding the official target, against a backdrop …
Large injections of liquidity into the banking system by the People’s Bank (PBOC) have grabbed headlines today. The moves have more to do with offsetting the usual spike in liquidity demand ahead of Chinese New Year than a response to capital outflows or …
21st January 2016
The GDP data, once the impact of the swings in China's stock market are stripped out, add weight to what our China Activity Proxy has been suggesting for some time – that growth in the real economy has begun to edge up recently on the back of policy …
20th January 2016
A shift in market expectations about China’s exchange rate has put Hong Kong’s peg to the US dollar under fresh scrutiny. But despite the surge in speculation, we think the peg will stay for years to come. … Could Hong Kong’s peg survive a speculative …
19th January 2016
The continued stability of the official GDP figures will do little to assuage concerns over their credibility. But even our own estimates, which point to much slower growth, suggest that the economy was broadly stable last quarter. … Q4 GDP & December …
Today’s data suggest that lending to the real economy remained strong at the end of last year, which should help support economic activity in the coming months. The loose monetary stance currently adopted by the People’s Bank means a further pick-up in …
15th January 2016
The latest trade data are a challenge to those who believe that China’s export sector needs renminbi depreciation to compete or that China’s economy is continuing to slow. … Another look at China’s trade …
13th January 2016
China’s trade data for December support our view that, despite the turmoil in Chinese financial markets, there has not been a major deterioration in its economy in recent months. Meanwhile, another large trade surplus last month provides a cushion for the …
The recent flood of capital leaving China has been driven primarily by increased scepticism that the People’s Bank will hold to its pledge to keep the renminbi stable. The fact that the PBOC has ended up in this position despite its massive foreign …
12th January 2016
China’s equity markets continue to tumble, its currency is under unprecedented pressure and Chinese policymakers’ reputation for competence is looking ever more tarnished. Contrary to many of the headlines though, the economic data show no sign of major …
11th January 2016
China’s economy is beset with a host of problems, but inflation isn’t one. Consumer price inflation remains high enough to keep concerns about deflation at bay but low enough to give policymakers plenty of room to loosen further. … Consumer & Producer …
The weekend’s inflation data should provide a respite from fears that China’s economy and financial markets are collapsing. We foresee another rise in consumer price inflation, which should further dampen concerns about deflationary pressure. … Inflation …
7th January 2016
The willingness of the People’s Bank to sell over $100bn of foreign exchange reserves last month is a measure of its belief that a stable currency is in China’s interests and that current downward pressure is driven by speculative rather than fundamental …
This week’s declines in China’s stock markets and currency raise a challenge to our relatively upbeat view of near-term prospects. But we continue to believe that growth is more likely to pick up than weaken over coming months. Indeed, we expect evidence …
6th January 2016
While today's unofficial manufacturing PMI hints at some further weakness in the manufacturing sector, other indicators suggest that the economy as a whole held up reasonably well last month. … PMIs …
4th January 2016
Strong hints from the People’s Bank that it is shifting the focus of its exchange rate management to a trade-weighted currency basket have intensified expectations of further renminbi declines. But there is no sign that the resulting capital outflows …
23rd December 2015
Our China Activity Proxy (CAP) points to a small uptick in growth in November. With the leadership pledging additional policy support, a more robust turnaround seems likely soon. … Growth edges …
22nd December 2015
One implication of the US Fed’s decision to raise interest rates is that its concerns about China have receded. Certainly, the financial market turmoil that spilled over from China to the rest of the world a few months ago has abated. The economic news …
18th December 2015
China’s activity data for November provide further evidence that policy easing has helped to stabilise the economy. We continue to expect conditions to improve over the coming months. … Further signs that the economy is turning a …
14th December 2015
The People’s Bank appears to be shifting its management of the renminbi to tracking a currency basket rather than the dollar. While some will see this as cover for currency devaluation, we suspect the goal is to keep the renminbi’s value broadly stable …
11th December 2015
Today’s data remain consistent with our view that policy easing is helping to buoy credit growth. … Bank Lending & Broad Credit (Nov.) …
Sentiment on China’s economic outlook remains downbeat with most anticipating a deeper downturn next year. In contrast, we think developments could surprise to the upside. … What to expect in …
10th December 2015
Today's data is consistent with our view that domestic price pressures are on the rise and that inflation is set to rebound going into next year. … Consumer & Producer Prices …
9th December 2015
Disappointing export data suggest that foreign demand remains subdued. More positively, a recovery in imports hints at a policy driven pick-up in domestic demand. … Trade …
8th December 2015
Despite widespread concerns about deflation, consumer price inflation has remained within a narrow (positive) range over the course of this year. With credit growth rebounding and wage growth remaining strong, we expect inflation to rise in 2016. … …
Today’s data suggest that capital outflows picked up sharply last month, leading the People’s Bank to resume selling FX in order to prop up the value of the renminbi. … FX reserves …
7th December 2015
A report today suggesting that all local governments may soon be allowed to auction off their fiscal deposits deserves more attention than it has received. Such a move would have important implications for both government finances and monetary conditions. …
4th December 2015
Three years on, there is no sign that China’s anti-corruption campaign is being eased, but its drag on economic growth is fading. … Drag on growth from anti-graft measures …
The latest PMI readings suggest that construction and service sector activity picked up last month and that momentum in the manufacturing sector, although still subdued, may also have improved slightly. … PMIs …
1st December 2015
The IMF has just confirmed that the renminbi will be added to its SDR basket. Thismay be of symbolic significance to some but we think it will make hardly anydifference to currency demand. In other market developments, China’s equities had avolatile end …
30th November 2015
The debate about China’s economic outlook hinges on what caused growth to slow early in 2015. One of the main culprits, in our view, was fiscal policy, which tightened significantly in late-2014 and early this year. Fortunately, most of this fiscal drag …
Our updated China Activity Proxy (CAP) suggests that growth remained broadly stable last month. The rebound we are expecting has not yet materialised but there is no sign of the slump in growth that many have feared either. … No rebound yet but growth …
26th November 2015
The main significance of today’s announcement by the People’s Bank (PBOC) that it is cutting standing lending facility (SLF) interest rates is that it is experimenting with a new monetary policy framework. This shift in itself does not constitute monetary …
19th November 2015
The latest round of Chinese data was met with plenty of gloomy headlines. We think these were overdone. The cloud over China’s economy may not have lifted but there were more positives than negatives in the October figures. Industrial output growth edged …
17th November 2015
The IMF’s decision to include the renminbi in the SDR basket will not directly increase demand for renminbi assets. The implicit endorsement of the renminbi as a reserve asset is unlikely to sway the decisions of global asset managers either. Indeed, …
16th November 2015
Hong Kong is often seen as a bellwether for the state of global trade. As such, its latest GDP figures are relatively reassuring, with growth of goods exports picking up and GDP growth last quarter the fastest in a year. … Hong Kong GDP …
13th November 2015
The weaker-than-expected October lending data are likely to add to doubts over the effectiveness of policy support. But overall credit growth is nonetheless continuing to accelerate, which is positive for the near-term economic outlook. … Bank Lending & …
12th November 2015
Industrial activity remained subdued last month but a pick-up in investment and strong retail sales suggest that the economy is still on track for a recovery over the coming quarters. … Activity & Spending …
11th November 2015
