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Our China Activity Proxy (CAP) confirms that growth weakened further last month. But with the recent step-up in policy support likely to shore up economic activity in coming months this could be about as bad as it gets for growth this year. … The worst …
20th May 2015
Policymakers are moving to ensure that funding difficulties don’t disrupt local government spending plans. This doesn’t constitute an about-turn in efforts to restrict off-budget borrowing, as some have suggested, but it does signal that government …
18th May 2015
Hong Kong’s economy remained subdued in Q1, although growth picked up slightly compared to the previous quarter. We expect growth to stage a stronger recovery over coming quarters, supported by a stepping up of fiscal support and as the global economy …
15th May 2015
Stories that the PBOC banned banks from increasing deposit rates when it raised the deposit rate ceiling at the weekend are another sign of policymakers’ ambivalence towards the use of market-oriented policy tools. Still, the fact that the ceiling was …
China’s credit growth slowed further in April. But with policy now easing, credit growth should stabilise in the months ahead, helping to relieve some of the downward pressure on the economy. … Bank Lending & Broad Credit …
13th May 2015
Weaker-than-expected data for April suggest that activity in industry and the real estate sector continued to slow coming into Q2. That said, with China’s economy less reliant on these sectors than it once was and with policymakers stepping up measures to …
China’s goods trade surplus last year was a third higher in dollar terms than at the previous peak in 2008. Yet the country’s current account surplus – the broadest measure of its economic imbalance with the rest of the world – was only half as large. The …
12th May 2015
Consumer price inflation edged up in April and should continue to recover in coming months. This, along with signs that producer price inflation is also beginning to bottom out, should ease concerns over deflation. … Consumer & Producer Prices …
11th May 2015
Today’s cut to benchmark interest rates is not a sign of panic as some will argue but a rational response to weaker-than-expected data. Policymakers have room to act more forcefully if needed but are choosing to dole out stimulus in a measured way. … PBOC …
A weaker-than-expected recovery in export growth suggests that foreign demand has softened going into Q2. Domestic demand also appears subdued, though the contraction in imports is still largely explained by lower commodity prices. … Trade …
8th May 2015
Migration into China’s cities appears to be slowing but the economic gains it has brought are far from drying up. Improvements to agricultural productivity should free up rural labour for years to come and underpin a continued shift into manufacturing and …
6th May 2015
There appears to be a great deal of confusion around how cuts to the required reserve ratio (RRR) affect China’s economy, with some even suggesting that changes to the RRR have no impact on monetary conditions whatsoever. Given that we expect further RRR …
4th May 2015
A stable PMI for China counts as good news after the recent run of poor data. But the official PMI has not been a particularly reliable guide to trends in industry over the past few months, so we’re not inclined to put much weight on today’s number … …
1st May 2015
Chinese equities have continued to surge, helped by a further jump in new account openings. Although equity prices are looking increasingly divorced from economic fundamentals, with policymakers set to provide further support in coming months, we see no …
30th April 2015
Unconfirmed reports that the People’s Bank is considering buying local government bonds have sparked talk of impending QE in China. That’s wide of the mark: unlike with asset purchase programs elsewhere, the goal in China may actually be to avoid …
28th April 2015
China’s flash PMI remains subdued, but not substantially weaker than over the past six months. Today’s reading for April does not support the view that activity is plunging. … HSBC/Markit Flash Manufacturing PMI …
23rd April 2015
Our China Activity Proxy (CAP) provides further evidence that the economy slowed in Q1 but also supports the view that the extreme weakness in some of the data for March was due to seasonal distortions. … GDP growth target not under threat despite weak …
22nd April 2015
Sunday’s cut to the required reserve ratio for China’s banks signals a stepping-up of policy support. The 100bp cut was double the usual size and the first move on this scale since late 2008. It is primarily a response to the weakness of recent data. Most …
20th April 2015
The frenetic opening of trading accounts and a surge in equity turnover have produced a boom for brokerages that appears to have added more than half a percentage point to China’s GDP growth last quarter. Leaving aside the wider repercussions, any cooling …
16th April 2015
New restrictions on the number of visits mainland residents can make to Hong Kong will affect only a small proportion of visitors to the territory. The retail sector will be put under further pressure, but we think the impact on the broader economy should …
There was another strong bout of seasonal disruption in the monthly data released today, but confirmation too that key trends from last year have continued into 2015. The property sector remains a major drag on growth. But the labour market is tight, so …
15th April 2015
Credit issuance was unusually weak in March but, with the late Chinese New Year break still casting a shadow, we wouldn’t read too much into this. Meanwhile, the fall in the value of foreign exchange reserves reflects currency fluctuations rather than …
14th April 2015
We suspect that the slump in China’s exports last month was the result of seasonal disruption to output rather than weakness in demand. On the import side, the headline figures still look awful, but once we account for the impact of lower commodity …
13th April 2015
Consumer price inflation held steady in March but we expect a drop in food price inflation to pull it lower over the coming months. Although inflation is likely to remain in positive territory, a further fall would be consistent with our forecast that the …
10th April 2015
Contrary to what is widely believed, China should continue to attract positive net foreign direct investment inflows for the foreseeable future, which should help spur further renminbi appreciation. … Outbound FDI won't eclipse inward FDI any time …
9th April 2015
After edging up in March, inflation is set to ease again – although remain positive – in coming months before rebounding in the second half of the year. … Uptick in inflation likely to reverse …
8th April 2015
Growth looks likely to have slowed sharply in Q1, in spite of recent cuts to the required reserve ratio and benchmark interest rates. This has raised concerns that policymakers are now struggling to offset downward pressure on the economy and may fail to …
3rd April 2015
Today's PMI readings suggests that manufacturing conditions, among large firms at least, have held up better than expected. But this doesn’t do away with the need for more policy support to prevent growth from slipping further. … Manufacturing PMIs …
2nd April 2015
Chinese equity markets surged over the past month to the highest in more than seven years, with sentiment boosted by growing expectations for further policy support. Meanwhile, the renminbi has recently reversed course against the US dollar and we think …
1st April 2015
The recent news on China's economy has been generally downbeat. But less attention has been paid to some encouraging structural shifts which mean that the risks of a slump in growth have diminished. In contrast to many, we have become more upbeat about …
27th March 2015
Today's PMI reading adds to evidence of a sharp slowdown in Q1. We expect policymakers to respond by stepping up measures to support growth. … HSBC/Markit Flash Manufacturing PMI …
24th March 2015
Business sentiment has deteriorated this quarter however there has been a pick-up in reported loan demand, perhaps spurred by recent policy easing. Meanwhile, fewer households believe house prices are unacceptably high but, even so, few are planning on …
23rd March 2015
Our China Activity Proxy (CAP) suggests that the economy has slowed markedly this quarter. We expect further policy support and are not too concerned about the outlook given how much room policymakers still have for manoeuvre. Nonetheless, the weak data …
China’s couples have responded less ardently than many had expected to relaxation of the one-child policy. But we shouldn’t be too worried about the impact on economic growth. … Low birth rate won’t derail …
20th March 2015
If there is one key message on the economy to take away from the National People’s Congress it is that the government is aware of downside risks to growth but confident that it has the tools and the policy space to deal with them. Given the weakness of …
17th March 2015
China is moving closer to full liberalisation of bank deposit rates. Households should benefit from higher returns while banks will find themselves squeezed. But some of the hoped-for gains from better credit allocation may not materialise. … What impact …
12th March 2015
Credit growth strengthened last month on the back of a more accommodative policy stance. That said, we still think that concerns over the build-up of credit risks mean policymakers will stop short of allowing a sustained rebound. … Bank Lending & Broad …
The slowdown in activity at the start of 2015 was even sharper than today’s headline figures might suggest because a bout of weakness a year before had provided a flattering base for comparison. Policymakers will continue to respond with further …
11th March 2015
February’s seasonal pick-up in food inflation will likely prove short-lived and we still expect inflation to fall back below 1% in coming months. Nonetheless, today's inflation data suggest that downward pressure on broader prices has begun to ease. … …
10th March 2015
Export growth has been strong so far this year, even after adjusting for the New Year volatility that led to surge in growth last month. That said, rapid trade-weighted renminbi appreciation and a weak global recovery mean the strength is unlikely to …
9th March 2015
Yesterday's budget left us none the wiser about how policymakers plan to manage the abrupt halt in off-budget financing that new rules are imposing on local governments this year. There could be some short-lived disruption to spending as a result. But …
6th March 2015
After a bounce in February, inflation in China looks likely to drift lower in coming months – but remain positive, we think – before rebounding in the second half of the year. … February bounce in inflation likely to be …
5th March 2015
The opening day of the National People’s Congress leaves us upbeat that the government will push ahead with reforms and make further progress in rebalancing the economy away from investment, even if this means accepting a slower pace of growth over the …
The People's Bank has cut benchmark rates in order to help some indebted firms cope with the rise in real borrowing costs that has resulted from lower inflation. But the central bank still appears to want to avoid a significant loosening of restrictions …
2nd March 2015
February's stronger-than-expected PMI readings suggest that a pick-up in domestic demand has led to a slight improvement in momentum, particularly among small firms, and that downward pressure on inflation has eased. … Manufacturing PMIs …
The unveiling of a new, lower GDP growth target at the National People’s Congress would be an encouraging sign that the government is facing up to the continued slowdown in China’s sustainable rate of growth. Meanwhile, new limits on off-budget borrowing …
27th February 2015
Market interest rates rose over the past month despite a required reserve ratio cut and repeated liquidity injections by the People’s Bank. We expect conditions to ease in coming weeks as demand for cash falls following the end of the New Year …
Hong Kong’s government has unveiled a budget that should help boost growth this year. There are other reasons to be optimistic about the outlook too, even though today’s GDP data confirmed that growth remained relatively weak at the end of 2014. … Hong …
25th February 2015
Today's PMI suggests that economic momentum has improved slightly and that downward pressure on inflation is easing. That said, it also points to weaker external demand on the back of rapid trade-weighted renminbi appreciation and remains consistent with …
Property prices in Hong Kong have risen to record highs on the back of accommodative monetarypolicy in the US and strong demand from mainland China. With the Federal Reserve set to tightenpolicy this year and growth likely to slow further in the mainland, …
23rd February 2015
