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Government promises of support for the property sector triggered sharp gains in China’s stock markets in the last week of October. Meanwhile, appreciation expectations appear to be returning for the renminbi and pushing the currency higher offshore. … …
31st October 2014
New rules requiring banks to ensure that deposits at the end of each month deviate by no more than 3% from the monthly average are a new headwind for China’s economy. The rules are designed to prevent banks from temporarily inflating deposit numbers to …
30th October 2014
Most of the headlines questioning China’s September trade data have focused on anomalies on the export side. But China’s imports also seem to have been distorted, which may be a sign that firms are becoming more creative in their attempts to evade capital …
28th October 2014
Although activity in industry rebounded in September, our China Activity Proxy (CAP) suggests that the wider economy continued to slow last month. … China’s growth remains on a downward …
27th October 2014
Today's PMI reading supports our view that the labour market remains healthy. That said, it also suggests that cooling domestic demand is still putting downward pressure on growth going into Q4. … HSBC/Markit Flash Manufacturing PMI …
23rd October 2014
Today's data suggest that slowing investment, particularly in the property sector, continues to put downwards pressure on growth. That said, healthy consumption growth and strong foreign demand mean the economy has held up better than many had feared. …
21st October 2014
It is tempting to dismiss the Communist Party’s talk of boosting the “rule of law” in China as simply hot air. Beneath the rhetoric though, the focus is on institutionalising the ongoing anti-corruption campaign and introducing changes that would reduce …
20th October 2014
There are several strong reasons – not least the evidence of previous downturns – to believe that continued falls in China’s property prices will have little impact on household spending. The risks lie elsewhere, in the links between property and the …
Credit growth slowed further last month, on the back of continued efforts by policymakers to address credit risks. Meanwhile, the fall in China's FX reserves reflects a stronger dollar, not FX sales by the People's Bank. … Lending, credit (Sep.) & FX …
16th October 2014
Although today's inflation data suggest that broad price pressures remain subdued, we aren't yet concerned about deflation risks. Rising pork prices mean the fall in food inflation last month is likely to prove short-lived. Meanwhile, lower inflation …
15th October 2014
The demonstrations in Hong Kong are taking their toll on the economy, with the retail sector so far bearing the brunt. But even if the protests die down, the ongoing corruption crackdown in China and the prospect of higher interest rates in the US means …
13th October 2014
The September trade data suggest that foreign demand remains healthy, albeit probably not as strong as the pick-up in export growth suggests. Import growth also strengthened but it was driven by a suspicious surge in imports for processing and re-exports …
Inflation looks to have remained low in September, with weak commodity prices and a cooling housing market helping to keep broad price pressures subdued. We see slightly higher inflation ahead, due to rising pork prices and utility price reforms, but …
10th October 2014
There has been some suggestion that policymakers are struggling to stimulate lending because firms have little appetite to borrow. Credit demand does appear to have softened. But there is no evidence that this is hampering the effectiveness of monetary …
9th October 2014
The economic fallout from a further escalation of the pro-democracy protests in Hong Kong would not be limited to the territory. Indeed, it is important not to underestimate the potential costs to mainland China if foreign investors become reluctant to …
3rd October 2014
Those hoping that a loosening of mortgage controls, announced by the People’s Bank yesterday, will set the stage for a recovery in the property sector are likely to be disappointed. Relatively tight liquidity conditions, as a result of official efforts to …
1st October 2014
Today's official PMI suggests that while conditions have held up better than many had expected on the back of healthy foreign demand, the cooling property sector has continued to weigh on economic activity and import demand. … Official Manufacturing …
October’s launch of the Shanghai-Hong Kong Stock Connect scheme has been eagerly awaited since it was announced earlier in the year. Now it risks being overshadowed by political unrest that raises questions about Hong Kong’s future as the financial …
30th September 2014
With thousands of pro-democracy protestors blockading the streets of Hong Kong’s main business district, the territory’s political crisis is showing no sign of dying down. The economy, which is already very weak, could easily be pushed into recession if …
29th September 2014
People’s Bank Governor Zhou Xiaochuan is once again rumoured to be on the verge of being replaced. We are sceptical of suggestions that Mr Zhou has lost out in a power struggle. A new governor might prefer to move more slowly on areas such as capital …
25th September 2014
Today's PMI reading suggests that conditions in the manufacturing sector have held up better than expected recently on the back of healthy export demand. That said, the economy still faces significant headwinds, particularly from the property sector, and …
23rd September 2014
August may not have been as weak as it initially looked but the China Activity Proxy (CAP) suggests that China’s economy has nonetheless slowed this quarter, with continued weakness in real estate and heavy industry doing most of the damage. … China's …
22nd September 2014
Perhaps the most notable development in today’s quarterly surveys from the People’s Bank is the sharp drop in reported loan demand but there are some more positive developments too. Firms report improving profitability and household sentiment has …
19th September 2014
Although liquidity operations by the PBOC have received the most attention this week, further measures to support small firms that were announced by the State Council on Wednesday are arguably more important given that these firms are the primary drivers …
18th September 2014
The general impression seems to be that the latest liquidity injections by the People’s Bank are a form of stealth stimulus. But these are in fact run-of-the-mill operations designed to smooth liquidity ahead of an upcoming holiday, when cash demand …
17th September 2014
Premier Li Keqiang’s comments last week prioritising reform over stimulus have taken on added significance in the light of the weekend’s weak activity data. Policymakers are aware that efforts to reverse the economic slowdown would worsen China’s …
15th September 2014
Broad credit growth continued to slow in August. However, a rebound in net new bank loans last month suggests that concerns about weak demand for credit, following a collapse in lending in July, were overplayed. Instead, much of the downwards pressure on …
12th September 2014
Today's inflation data suggest that price pressures remain subdued due to falling commodity prices and a relatively neutral monetary policy stance. As a result, even though pork prices and utility price reforms may drive inflation slightly higher over …
11th September 2014
We are sceptical of recent claims that productivity across China’s economy has started to fall. If it were true, we’d be slashing our medium-term growth forecasts. But the reality is not so dire. … Productivity has not gone into …
10th September 2014
After another month of stable inflation in August, we expect rising pork prices and utility price reforms to push inflation higher over the coming quarters. But easing pressure on housing costs, weak commodity prices and a relatively neutral monetary …
9th September 2014
Stronger-than-expected export growth for August points to healthy foreign demand. In contrast, weaker-than-expected import growth suggests that cooling investment, particularly in the property sector, has further weighed on domestic demand. The result is …
8th September 2014
Reforms just agreed should drastically reduce off-budget borrowing by local governments and make it much easier to monitor the build-up of government debt. These moves are long overdue but the fact that they are happening now is a welcome sign of …
3rd September 2014
Today's PMI readings suggest that economic activity softened further last month. That said, policymakers are rolling out new measures to offset some of this downwards pressure and ensure a gradual slowdown rather than a sharp drop off in growth. … …
1st September 2014
Renminbi appreciation is back in full swing but upwards momentum in Chinese equities appears to have faltered in August following a string of weak data releases. … Renminbi regaining lost …
29th August 2014
China’s economy continues to face headwinds, particularly from the property sector. But the key lesson from recent months is that policymakers have plenty of tools at their disposal to shore up growth in the short term. Accordingly, while we are still …
28th August 2014
Our China Activity Proxy (CAP) adds to evidence elsewhere that growth slowed in July after a strong end to Q2. Construction of affordable housing has helped shore up activity in the property sector but this was not enough to offset the impact of waning …
22nd August 2014
Today's PMI reading points to cooling conditions in the manufacturing sector on the back of moderating policy support and weak lending activity last month. But with lending set to recover this month and policymakers prepared to step in if growth slows too …
21st August 2014
A record RMB2.0trn fall in bank deposits in July, which put pressure on banks’ loan-to-deposit ratios (LDRs), appears to have been the main factor behind last month’s weakness in lending. LDRs are a particular constraint on smaller banks and it was these …
19th August 2014
Hong Kong's economy contracted in the second quarter, due to weak domestic demand and services exports, but an expected pick-up in the global economy should underpin a rebound over the coming quarters. The key risk is higher interest rates and their …
15th August 2014
Today’s data on lending, output and spending for July suggest that, after a strong Q2, China’s economy slowed at the start of Q3. Policymakers are likely to continue to provide targeted support to those sectors that are struggling the most but a more …
13th August 2014
China’s trade surplus in July rebounded to a record high on the back of strong export demand and a fall in import growth. With export demand set to remain strong as the global recovery gains momentum, we expect the trade surplus to remain large. This …
8th August 2014
Headline inflation looks set to remain roughly stable in the near term. Although it is likely to rise again over the next few quarters on the back of rising pork prices and an increase in utility prices, inflation is unlikely to become a big concern. … …
6th August 2014
Cuts to benchmark interest rates could end up doing more harm than good to China’s economy. Policymakers worried about elevated financing costs in the corporate sector would do better to focus on improving access to credit for smaller, more productive …
4th August 2014
The latest PMI surveys confirm that the recovery in manufacturing activity has continued to accelerate going into Q3. That said, policymakers are seemingly comfortable with current growth rates and are rolling out fewer new stimulus measures, which limits …
1st August 2014
Equities in China have soared in recent days as sentiment about the economy’s prospects has warmed. But we don’t expect the rally to be sustained. … Shanghai equities on a …
31st July 2014
China’s balance of payments data for Q2 show substantial outflows on the financial account. But this does not mean that capital has been fleeing the country. Instead it is a reflection of the fact that diminished appreciation expectations have been …
30th July 2014
China’s anti-corruption campaign has claimed its biggest scalp to date with today’s formal announcement of an investigation into former Standing Committee member Zhou Yongkang . Over the past 18 months, the campaign has undermined demand for luxury …
29th July 2014
Our China Activity Proxy (CAP) suggests that there was a strong rebound in economic growth at the end of Q2. The property sector remains a drag, but this was more than offset by relatively broad-based strength elsewhere. … Economy was gaining momentum at …
Today's PMI reading suggests that conditions in the manufacturing sector have continued to improve going into Q3 on the back of targeted support measures and warming external demand. That said, subdued activity in the property sector is likely to remain a …
24th July 2014
Six state-owned firms were named last week to take part in pilot reforms intended to boost state sector performance, partly by encouraging private investment. The experiment could have far-reaching ramifications but success is not assured. Private …
21st July 2014
