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Today's full breakdown of Q4 GDP suggests that a key reason for China's better-than-expected growth last quarter lies with the recent stock market rally, which appears to have driven a sharp pick-up in financial sector growth. … GDP by Sector …
21st January 2015
The Swiss National Bank’s (SNB) decision last week to abandon its exchange rate ceiling has put Hong Kong’s peg to the US dollar under fresh scrutiny. While the peg creates a number of problems, it remains the best option for Hong Kong. We expect it to …
20th January 2015
Today's data suggest that although slowing investment, particularly in the property sector, continues to put downward pressure on growth, this was offset last quarter by a pick-up in consumption and service sector activity. … Q4 GDP & December Activity …
There had been signs even before today’s share price slide that China’s equity markets were coming off the boil. The direct impact of any sustained slump in equity prices would be small, both in China and elsewhere, but there would be implications for …
19th January 2015
Recent progress made towards curbing the rise of China's credit-to-GDP ratio is likely to slow going forward as it becomes more difficult to continue to rein in credit without undermining growth. … No end in sight to build-up in China's credit …
While a pick-up in banking lending growth in December suggests a slightly more accommodative policy stance, we think stronger growth in other forms of credit reflects a weak base for comparison due to a cash crunch in December 2013 rather than a loosening …
15th January 2015
Stronger-than-expected export growth points to healthy external demand. Meanwhile, although import growth remains subdued, a pick-up in commodity import volumes has prevented falling commodity prices from dragging it lower. … Trade …
13th January 2015
A modest pick-up in consumer price inflation in December, on the back of a sharp rise in vegetable prices, is a reminder that Chinese inflation is much less sensitive to oil prices than inflation in most countries and that the risk of deflation is low. …
9th January 2015
Markets have latched onto two low-key policy developments at the start of 2015 as evidence that policymakers are pursuing both monetary and fiscal stimulus by stealth. We don’t think either amounts to much. … Shining a light on “stealth” …
8th January 2015
Retail fuel prices have fallen rapidly in China, as elsewhere. In December though, China’s vegetable prices rose sharply, with the result that we are unlikely to see the large fall in headline inflation that many will be expecting. Further ahead, …
7th January 2015
A month after benchmark interest rates were cut in China, market interest rates have risen, putting the People’s Bank under pressure to do more to reduce financing costs. Meanwhile, the equity markets in Shanghai and Shenzhen have continued to soar. The …
22nd December 2014
Interbank interest rates this week recorded their biggest increase in several months. The rate increase is much smaller than at this time last year but a key difference is that the People’s Bank cut benchmark rates just a month ago and said that it wanted …
19th December 2014
Activity cooled in both industry and real estate in November but our China Activity Proxy (CAP) suggests that growth across the wider economy nonetheless edged up on the back of stronger activity elsewhere. Although this up-tick is likely to prove …
18th December 2014
Manufacturing activity looks to have continued to cool in recent weeks in spite of last month's rate cut, an apparent loosening of lending controls and the return to normal operations at factories in northern China following the November APEC summit. … …
16th December 2014
The government is tomorrow likely to announce an upward revision of perhaps 5~10% to its estimate of the size of China’s economy. Nothing will have changed on the ground, but the data revisions will influence debates about imbalances, the scale of China's …
15th December 2014
Bank lending came in much stronger than most had anticipated last month but the bigger picture is that credit growth overall remains on a downward path. … Bank Lending & Broad Credit …
12th December 2014
Today’s activity and spending data from China show that property and industry continue to face headwinds. The credit data, just released, suggest policymakers are taking a somewhat more supportive stance. But given the tone of the recent Economic Work …
A fall in inflation to a five-year low last month may add to deflation fears but we think such concerns are overplayed. Easing inflation is being driven by falls in global commodity prices which should, on balance, benefit most firms and households. … …
10th December 2014
Proposed new regulations governing how banks handle wealth management products should help to contain risks in this rapidly growing area, though at the cost of crimping credit growth. … Wealth management product risks under …
9th December 2014
The November trade data suggest that both external and domestic demand have softened somewhat. That said, we think that underlying conditions have held up better than the sharp falls in headline export and import growth suggest. … Trade …
8th December 2014
Inflation may have dropped to its lowest in nearly five years in November. We are expecting further falls in the months ahead that will add to concerns about the threat of deflation. … Inflation to moderate …
5th December 2014
While there are some economic reasons for China’s equity markets to have done well recently, they can’t explain the scale of the recent surge. Turnover, leverage and account openings have all soared and there is a sense of mania taking hold. … What is …
4th December 2014
China’s leaders will be gathering in Beijing shortly to discuss priorities for 2015. In this month’s China Watch we outline our views on what to expect on growth, monetary policy and reform. … What to expect in …
Today's PMI readings suggest that the manufacturing sector continues to face headwinds. And while it is too early to look for the impact of last month's rate cut in today's data, it seems unlikely that it will be enough to prevent a further slide in …
1st December 2014
The recent benchmark rate cut triggered sharp gains in China’s stock markets in the last week of November. Meanwhile, although trading volumes in the newly-launched Shanghai-Hong Kong Stock Connect scheme have been underwhelming, it is too soon to dismiss …
28th November 2014
There are tentative signs that the People’s Bank (PBOC) has resumed currency intervention. Foreign exchange purchases by all financial institutions, a proxy for purchases by the PBOC, turned positive and were the largest in six months in October. The PBOC …
27th November 2014
We foresee two more cuts in China's benchmark lending rates by the middle of next year but not the sizeable acceleration in credit that would be needed for a substantial pick-up in GDP growth. Mortgage rates should fall a little which will give a further …
26th November 2014
China’s rate cuts will ease financing strains, particularly for large firms, but the impact on GDP growth is likely to be small. There is absolutely no reason to believe that concerns over the level of the renminbi played any part in the decision. … …
21st November 2014
Today’s PMI reading suggests that manufacturing activity has continued to cool, but it also provided some hope that downward pressure on domestic demand has eased up so far in the fourth quarter. … HSBC/Markit Flash Manufacturing PMI …
20th November 2014
Although activity in industry cooled further in October, our China Activity Proxy (CAP) suggests that growth in the wider economy was stable last month, thanks in part to a respite in the downward pressure from property construction. … Respite in property …
19th November 2014
Today’s GDP figures show that Hong Kong’s economy rebounded strongly in the third quarter, on the back of big increases in consumption and exports. Although growth will probably weaken again in Q4 because of the ongoing pro-democracy protests, prospects …
14th November 2014
Broad credit growth continued to slow in October, supporting our view that, despite recent liquidity injections, the People’s Bank (PBOC) is seeking to keep credit growth on a downward trajectory. … Bank Lending & Broad Credit …
Today's activity and spending data have brought further evidence that Q4 has got off to a slow start. But with President Xi sounding relaxed about the prospect of a drop to 7% GDP growth, a shift in policy still seems unlikely. … Fixed investment, …
13th November 2014
The Shanghai-Hong Kong Stock Connect scheme has the potential to lead to a huge increase in capital flows both into and out of China. But it will start slowly and be scaled up only gradually. … How big a deal is the Shanghai Connect …
11th November 2014
Over-invoicing continues to distort both China's exports and its imports, but the underlying picture is of healthy foreign demand and subdued demand at home. Meanwhile, the inflation data have intensified the debate over the threat of deflation. … Trade & …
10th November 2014
Inflation is at a four-year low and looks set to remain lower than we had previously anticipated. But we don’t think deflation is the threat that some believe or that policymakers should respond to weaker price pressures by loosening policy. … Inflation …
7th November 2014
The outlook for China’s economy and for economic policy will be determined by what happens to the property sector and to employment. Despite the latest increase in support for property, the outlook for the sector remains poor. But as long as the labour …
4th November 2014
Although the PMIs diverged in October, the breakdown of both is consistent with cooling domestic demand and a further slowdown in growth going into Q4. … Manufacturing PMIs …
3rd November 2014
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 …
