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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 …
25th January 2016
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
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 …
