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Our China Activity Proxy (CAP) points to growth being markedly slower than the official figures show. That said, it supports the view that growth stabilised in Q2 and that policy support has recently begun to help shore up economic activity. … Economy was …
22nd July 2015
The equity market has received all the attention recently but evidence that the labour market is coming off the boil arguably matters more to China’s economy. There was a big fall in the ratio of job openings to job seekers in Q2 and slightly fewer new …
20th July 2015
While the support to growth last quarter from surging equity turnover and rebounding property sales will fade before long, we think that policy support will help limit the downside risks to growth. … Policy support to counter growth risks from property, …
16th July 2015
China’s statistics bureau responded today to our argument that glitches in the way it calculates GDP have caused it to overstate growth in recent quarters. It has not laid our doubts to rest. … Longstanding error still exaggerating GDP …
15th July 2015
Q2’s stronger-than-consensus GDP growth partly reflects an unsustainable surge in financial sector activity that will prove short-lived. Even so, there are plenty of positive signs on broader economic momentum in today’s data too. … Growth stabilises on …
Headline credit growth slowed again last month, but the data are nonetheless consistent with a stepped up pace of policy support. Meanwhile, the fall in the value of foreign exchange reserves hints at a step-up in FX sales by the People’s Bank. … …
14th July 2015
The June trade data are relatively upbeat. A further recovery in external demand pushed up export growth to a four-month high. Meanwhile, although the fall in commodity prices late last year has kept y/y growth in import values in negative territory, a …
13th July 2015
With only a small and relatively wealthy portion of Chinese households exposed to the stock market, we aren’t particularly concerned about the impact of recent big falls in equity prices on consumption. Indeed, given that the stock market didn’t provide …
10th July 2015
Although the recent softening in global commodity prices helped pull down producer price inflation last month, today’s data still suggest that domestic price pressures are rising and that deflation concerns are overplayed. … Consumer & Producer Prices …
9th July 2015
We expect inflation to have risen in June and for further increases in months ahead to quash any lingering concerns over deflation. … Inflation picking …
8th July 2015
The response to the equity market collapse shows that officials have been rattled by a clear policy failure. But it doesn’t signal an about-turn on reform. … Leadership rattled but not reversing course on …
7th July 2015
Structural changes in China’s economy are transforming its economic relationship with the rest of the world, as domestic demand shifts from investment to consumption, outbound tourism surges and the private sector rather than the People’s Bank directs …
China’s leadership has doubled down on its efforts to prop up equity prices because it believes that its own credibility is now coupled to continued gains on the markets. … China puts faith in market …
6th July 2015
Strong sales and rebounding prices have raised hopes that China’s property sector is on the cusp of a turnaround. But those expecting a return to the rapid rates of construction growth seen over the past decade will be disappointed – developers are …
2nd July 2015
Today's PMI readings were slightly weaker than expected but do not change the general picture, which is that growth is recovering on the back of both an improvement in external demand and a policy induced pick-up in domestic activity. … Manufacturing …
1st July 2015
China’s equity markets ended a nerve-shredding month with a large bounce in the final hours of trading today. There are echoes of the bubble in 2007 and 2008 when prices swung wildly in both directions both on the way up and on the way down. A key …
30th June 2015
The failure of Saturday’s policy moves to lift equity prices for more than a few minutes at the start of trading today has focused attention on what else policymakers might do to support the markets. The lesson from China’s last equity bubble is that, …
29th June 2015
A “best case” scenario is that a continued equity collapse would knock a percentage point off China’s GDP growth simply by cooling currently overheated financial sector activity. But the rapid expansion of leverage over the past year means that a sharper …
26th June 2015
A new proposal to do away with the loan-to-deposit ratio won’t relax the primary constraints on bank lending. It should, however, mean that a greater share of lending is directed towards smaller and generally more efficient firms. … Scrapping the …
24th June 2015
Although activity remains subdued in parts of the economy, most notably property and heavy industry, our China Activity Proxy (CAP) suggests that policy support is helping to shore up growth. … GDP growth on track to rebound in …
The flash reading of China’s manufacturing PMI rose further in June, led by a rise in new export orders. This, put together with recent evidence that policy measures are helping to shore up domestic demand, means there is good reason to think that the …
23rd June 2015
China’s banks are reporting a deterioration in loan demand that raises questions about the effectiveness of recent policy loosening. We put more weight on actual lending, which has remained strong, but this is a shift that deserves close attention. … …
19th June 2015
The local government debt swap is starting to have an impact on the flow of financing in China that has been widely overlooked and that should support the economy. Local governments have begun to issue bonds in recent weeks to refinance the loans of local …
18th June 2015
Hong Kong has both the highest life expectancy and the lowest birth rate in the world. One consequence is that Hong Kong’s working age population is set to decline by more than that of any other territory over the next 30 years, which would erode the …
16th June 2015
An improvement in most of the key activity and spending indicators for May suggests that recent policy support measures are seeing some early success in shoring up economic activity. … Activity & Spending …
11th June 2015
Headline credit growth continued to slow last month, but the latest figures are nonetheless consistent with a stepped up pace of policy support. … Bank Lending & Broad Credit …
Today’s doubling of the quota for local government debt swaps indicates that the central government believes the programme has so far been a success, even if banks have only been buying the new bonds under duress. The swap and shift to bond financing …
10th June 2015
Today's data support our view that, the usual volatility in food inflation aside, price pressures are rising and that deflation concerns are overplayed. … Consumer & Producer Prices …
9th June 2015
Foreign demand still looks subdued, despite a stronger-than-expected recovery in export growth. Meanwhile, a fall in commodity import volumes disappoints hopes that recent policy support measures would shore up import demand. … Trade …
8th June 2015
A seasonal slide in vegetable prices that should prove short-lived may have pulled inflation down in May. But the bigger picture is that underlying price pressures appear to have picked up. We expect inflation to rebound over the coming quarters. … …
5th June 2015
Flaws in how China’s GDP data are calculated exaggerated both the downward pressure on prices in the first quarter and the rate at which the economy is growing. … More evidence GDP growth …
4th June 2015
Today's PMI readings suggest that although external demand remains weak, an uptick in domestic demand – likely the result of recent policy support – is now helping to ease downward pressure on growth . … Manufacturing PMIs …
1st June 2015
This month ended with a crash on China’s stock markets. But if the equity bubble of 2007 is any guide, this may not be the end of the speculative rally. … Equities on a …
29th May 2015
The failure of policy loosening over the past six months to stimulate an economic rebound has led some to suggest that elevated real interest rates or oppressive debt burdens are hobbling corporate loan demand. A more pertinent concern in our view is …
Growth in property sales returned to positive territory for the first time in over ayear last month, helped by lower mortgage rates and a loosening of purchasecontrols. But hopes that this marks the start of a broader turnaround for the realestate sector …
22nd May 2015
China’s flash PMI remains subdued. Nonetheless, the index's first improvement since February suggests that policymakers' efforts to shore up activity may finally be having the intended effect. … HSBC/Markit Flash Manufacturing PMI …
21st May 2015
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
