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Volatile food prices aside, price pressures were largely stable in October. Looking ahead, we expect inflation to edge higher in the coming months. But the window for further interest rate cuts will remain open for some time yet. … Consumer & Producer …
10th November 2015
Capital outflows from China appear to have eased while the trade surplus is at an all-time high. As a result, downward pressure on the renminbi has dissipated. We suspect, contrary to the analyst consensus, that a stronger renminbi lies ahead. … Fading …
9th November 2015
Headline inflation is likely to have edged down in October due to a fall in food price inflation. But the bigger picture is that underlying price pressures appear to be picking up. Looking ahead, we think that fears of deflation in China will look …
5th November 2015
When the PBOC cut benchmark interest rates late last month, it also removed the regulatory ceiling on banks’ deposit rates. This final step in liberalising interest rates came sooner than many had anticipated. We take it as a sign that policymakers remain …
3rd November 2015
The latest PMI readings suggest that momentum in the manufacturing sector continued to improve last month, helped by a pick-up in foreign demand, and that service sector growth is still holding up reasonably well. … PMIs …
2nd November 2015
Chinese equities broke a four-month losing streak in October. Meanwhile, a contraction in spreads for corporate bonds has sparked fears that a bubble is building. But there is little that looks likely to trigger a reversal in the near term. … Attention …
30th October 2015
A communique released after the conclusion of the Fifth Plenum provides a glimpse at the contents of the upcoming Five-Year Plan. It suggests that policymakers are not wavering on their reform ambitions despite speculation that recent market volatility …
The abolition of China’s controversial one-child policy may have grabbed plenty of headlines, but the economic impact of the move will be small. … Abolition of one-child policy does not alter growth …
29th October 2015
Our updated China Activity Proxy (CAP) continues to suggest that the economy is expanding markedly slower than the official figures claim. However, it remains consistent with our view that, after slowing sharply at the start of the year, growth has since …
The answer to the question of whether China’s economy is sinking or swimming lies in its service sector. Some firms are thriving while others are struggling. Crucially though there is no evidence that conditions in general have deteriorated since last …
The People’s Bank has delivered another jolt of stimulus in the form of cuts to both benchmark interest rates and the required reserve ratio. Deposit rates have also now been fully liberalised, an important step in financial reform that has been …
23rd October 2015
For all the (justified) doubts over the accuracy of the headline growth rates, the third quarter GDP data provide evidence of encouraging shifts in the economy. According to the official data, services are growing faster than a year ago, even though …
China’s leadership is likely to use its forthcoming Five-Year Plan to signal that it is not wavering on the need for structural reform. In fact, progress over the first three years of President Xi's term has been more far-ranging than generally …
22nd October 2015
Although we think the official GDP figures overstate growth, we believe that it is primarily industrial growth that is exaggerated and are more willing to take the strength in services at face value. … Service sector activity looks healthy despite data …
20th October 2015
The continued stability of the official GDP figures will further cement concerns over their credibility. For our part, while we do think the official figures are currently overstating growth by a wide margin, we nonetheless have reason to think that …
19th October 2015
We shouldn’t expect China to have a statistical system as robust as those in the developed world. But the problems in China go beyond those normally found in an emerging economy. The biggest is that the GDP growth rate is politically sensitive, which …
16th October 2015
Broad credit growth accelerated to a nine-month high in September. Although this will add to concerns about the trajectory of Chinese debt levels, in the short-run it will nonetheless be supportive of economic activity. … Bank Lending & Broad Credit …
15th October 2015
Today's inflation data suggest that seasonal factors and volatile food prices aside, price pressures were basically stable last month. Nonetheless, we think it is only a matter of time before inflationary pressures begin to rise again. … Consumer & …
14th October 2015
Stronger-than-expected export data hint at warming foreign demand. Meanwhile, we aren’t as concerned about domestic demand as some given that the contraction in imports values continues to mostly reflect falling import prices rather than volumes. … …
13th October 2015
A seasonal slide in fruit and vegetable prices may have temporarily pulled down consumer price inflation last month. But the bigger picture is that underlying price pressures appear to be picking up. We expect a rebound in inflation over the coming …
8th October 2015
Today’s data on China’s foreign exchange reserves suggest that capital outflows eased last month, allowing the People’s Bank to reduce its currency intervention. … FX reserves …
7th October 2015
The official GDP figures are likely to show a small slowdown in China’s growth rate in Q3 – and also to be greeted with a large amount of scepticism. We’d put more weight on the details of the GDP breakdown and also on the monthly activity data. Both are …
5th October 2015
Downbeat sentiment is still weighing on the PMIs, but today's better-than-expected readings still support our view that the economy is holding up better than many think. … Manufacturing PMIs …
1st October 2015
The latest surveys of banks, companies and households in China show a marked deterioration in sentiment about the economy although measures of business profits and orders and of the labour market have remained more stable. … The view from the ground – …
30th September 2015
After a tumultuous few months, Chinese stock markets stabilised ahead of a week-long recess for the Golden Week holidays. Meanwhile, market interest rates remain near record lows and the PBOC appears to have reinstated a soft peg to the US dollar. … …
Today’s weaker-than-expected PMI will add to mounting concerns over Chinese growth. That said, Caixin’s manufacturing PMI has not provided a particularly good reading of the health of the broader economy in recent months and so it is still too early to …
23rd September 2015
It is likely to be a long time before any “Shanghai-London Stock Connect” scheme gets off the groundand even when it does the impact will be small. … Shanghai-London Stock Connect, more hype than …
22nd September 2015
Many remain worried that China is in the midst of a deepening economic crisis, particularly after the US Fed voiced its concerns last week. But these fears are overblown. Our updated China Activity Proxy (CAP) suggests that, after slowing sharply at the …
China is growing at a slower rate than a year ago and much slower than five years ago. But the widely-held view that growth has slumped in the past few months – which seems to have been a key factor in the Fed’s decision not to hike – is wide of the mark. …
18th September 2015
China’s statistics bureau last week announced changes to how its GDP figures are compiled. In principle, the shift should improve the precision of the data. In practice, the changes to historical real growth rates are small and questions about the …
16th September 2015
China’s latest proposals to shake-up state-owned industry are underwhelming. We expect the economy to continue growing at decent rates over the years ahead, but believe this will happen in spite of rather than because of the government’s plans for state …
It is widely understood that the value of China’s imports has been pulled down by falling commodity prices. Less well appreciated is that lower commodity prices also explain in large part why China’s exports have fallen in value so far in 2015. … Exports …
14th September 2015
The weakness in August comes as no surprise, at least to us, given the disruptions to activity last month as a result of the Victory Day parade preparations and Tianjin blast. The bigger picture is that with these disruptions now fading and credit growth …
Today’s data for August confirm that policy easing has led to a rebound in credit growth. This turnaround will raise concerns among many that efforts to rein in debt have been shelved, but it is a welcome shift given the depth of current concerns about …
11th September 2015
Producer price deflation deepened last month on the back of a softening in global commodity prices. But the stronger-than-expected pick-up in consumer prices still supports our view that domestic price pressures are on the rise. … Consumer & Producer …
10th September 2015
Concerns over deflation in China look increasingly misplaced, with consumer priceinflation likely to have hit a one-year high in August and on course to rise further inthe final months of this year. … Inflation on the …
8th September 2015
Trade growth remained subdued last month but there are good reasons to think that the outlook is brighter than many believe. … Trade …
Capital outflows from China have picked up since last month’s botched currency reforms but by less than many had feared. Our view, in any case, is that outflows don’t pose as big a threat to China’s economy as many believe. … Capital outflows not as large …
7th September 2015
Today's PMI readings suggest that industrial activity softened in August, but the weakness should be temporary and there are good reasons to expect a rebound in coming months. … Manufacturing PMIs …
1st September 2015
The Tianjin blast, along with efforts to ensure blue skies in Beijing ahead of this week’s Victory Day parade, will have weighed on industrial activity in August. But the drag from these disruptions should prove temporary and the bigger picture is still …
31st August 2015
China’s policymakers have had a dreadful month with a series of market interventions that were both badly conceived and poorly communicated. … Policy missteps cause market …
Although there has been a surge of speculation in the wake of China’s exchange rate move that Hong Kong could abandon its US dollar peg, we expect the peg to remain in place well into the next decade. … Little chance of a Hong Kong …
27th August 2015
After the drama of the past few days, our updated China Activity Proxy (CAP) tells a relatively reassuring story about the state of China’s economy. … No sign of crisis in latest activity …
26th August 2015
With the government’s efforts to prop up equity prices through direct purchases in tatters, policymakers have changed tack with a simultaneous cut to benchmark interest rates and the required reserve ratio. The move may halt the market slide but we …
25th August 2015
Panic about China is overblown Investors are overreacting about economic risks in China. The collapse of the equity bubble tells us next to nothing about the state of China’s economy. In fact, recent data have been more positive than the headlines might …
24th August 2015
Sliding share prices over the course of the past week have exposed the limits of the government’s interventions to support the market. Indeed, in going to such lengths to save the market, the government has probably set back the chances of it delivering …
21st August 2015
Today’s weaker-than-expected PMI will add to mounting concerns over Chinese growth. Nonetheless, we continue to believe that sentiment is currently overly downbeat and that policy support will limit the downside risk to economic activity over the course …
Economic activity in Tianjin has yet to return to normal several days after the devastating explosions there. The city is a major industrial centre and the world’s tenth largest port. While most of the port has remained in operation, damage to warehousing …
18th August 2015
Hong Kong’s GDP growth slowed last quarter, dragged down by a fall services exports and subdued consumer spending. Looking ahead, we expect growth to remain weak in the coming quarters as exports remains soft and monetary conditions begin to tighten. … …
14th August 2015
Today’s PBOC press conference supports our view that the fall in the renminbi as a result of the shift to a new reference rate mechanism was a one-off and not an attempt to engineer a large scale competitive depreciation. … RMB set to stabilise as PBOC …
13th August 2015
