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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
Data for January showed Chinese banks continuing to sell FX to the non-bank sector last month. This has a few implications. First, the fact that banks were net sellers despite a record trade surplus and strong FDI inflows points to large scale capital …
17th February 2015
The slide in inflation in China, as elsewhere, has been driven primarily by commodity price falls due to increases in global supply. It is unambiguously positive for China’s economy. Evidence that domestic oversupply has contributed to the latest price …
16th February 2015
Today’s lending data suggest that while a slightly more accommodative policy stance has continued to support bank lending, broader credit growth remains on a downward path. … Bank Lending & Broad Credit …
13th February 2015
Inflation fell to a five-year low in January but we don’t think this should spark concerns over impending deflation. The drop was largely due to volatile food prices ahead of Chinese New Year and should prove short-lived. Indeed, January is likely to be …
10th February 2015
After sharp gains against most other currencies over the past year, the renminbi is no longer clearly undervalued. But there is no strong reason to believe – as many now seem to – that the renminbi is set for significant falls. … Five key questions …
9th February 2015
We expect consumer price inflation to have fallen to the lowest in more than five years in January, dragged down by further declines in commodity costs and the ususal volatility around Chinese New Year. However, this should be the low-point for inflation …
The sharp fall in headline trade growth in January is not cause for alarm as it largely reflects the usual volatility ahead of Chinese New Year, along with the fall in global commodity prices which has lowered the dollar value of imports. … Trade …
Today’s required reserve ratio cut is primarily a signal that the People’s Bank is maintaining the more accommodative stance adopted in November rather than a response to capital outflows or “currency wars”. The next policy steps will depend in part on …
4th February 2015
While the PMI readings for January are less downbeat on conditions among small firms, they suggest that momentum has continued to deteriorate among larger firms on the back of softening external demand. … Manufacturing PMIs …
2nd February 2015
The release of figures showing that China’s working age population continued to fall last year has revived concerns about demographic headwinds to China’s growth. In this China Watch we discuss why concerns over a shrinking workforce are overplayed and …
30th January 2015
Chinese equities turned more volatile over the past month, and there are signs that some steam may be coming out of the market. Meanwhile, market interest rates have been relatively stable, with a spike in December having been largely reversed this month. …
Our China Activity Proxy (CAP) suggests that growth stabilised in Q4, but that momentum across key parts of the economy was fading again in December. … Weak end to …
28th January 2015
China’s exporters continued to gain global market share last year but the recent sharp rise in the renminbi against other emerging market currencies is likely to put them under pressure in 2015. US data show that the prices of imports from China have …
27th January 2015
Following stronger-than-expected industrial output growth for December, today's flash manufacturing PMI reading provides a further sign that, although the economy continues to face headwinds from a slowing property sector, downward pressure on domestic …
23rd January 2015
