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Policymakers appear poised to take a key step in the process of interest rate liberalisation, which is itself an important test of their ability and desire to push through difficult reforms. … China set to take next step towards deposit rate …
17th July 2014
Economic activity appears to have picked up in June, resulting in stronger-than-expected Q2 growth. This should assuage hard landing fears and leave policymakers feeling vindicated in their decision not to pursue more forceful stimulus. … Q2 growth …
16th July 2014
The rebound in credit growth last month has more to do with a weak base for comparison due to the cash crunch last year, than with the current policy stance. Meanwhile, with upwards pressure on the reminbi from trade and capital inflows only being …
15th July 2014
Despite an increase in the headline growth rate, June’s exports were disappointing, perhaps signalling that global demand at the end of the second quarter was not as healthy as had been hoped. China’s imports were weaker though and, as a result, its trade …
10th July 2014
Consumer price inflation edged down in June on the back of a slight easing in food inflation. This fall should prove short-lived given that pork prices look set to pick-up in coming months. More broadly though, today's data confirm our view that, food …
9th July 2014
Inflation looks to have stabilised for now but pork prices are likely to drive it higherduring the second half of the year. Producer price inflation is also set to pick up incoming months on the back of the tepid recovery in global commodity price …
7th July 2014
Targeted policy intervention has helped shore up activity recently but China’s economy will face continued headwinds from a slowing property sector and efforts to rein in credit in the years ahead. Asa result, while we don’t expect a hard landing, we …
3rd July 2014
Today's PMIs suggest that conditions in the manufacturing sector have continued to hold up reasonably well, helped by the government's targeted support measures along with healthy external demand. That said, further measures may be need to shore up growth …
1st July 2014
Policymakers in China have good reason to be pleased about the state of the economy at the half-way point of 2014. Their decision to tweak policy rather than opt for broad stimulus appears to have been vindicated, with recent data suggesting that growth …
30th June 2014
The renminbi has been allowed to strengthen by 0.5% against the dollar so far this month. A rebounding trade surplus will, in our view, force the People’s Bank to tolerate further gains in the months ahead. Meanwhile, in the equity markets, foreigners …
27th June 2014
Business and household confidence in China took a turn for the worse this quarter, but it is not at an alarmingly low level. Meanwhile, banks are reporting a decline in loan demand, particularly from small and medium-sized firms. And appetite to buy …
26th June 2014
The foreign exchange reserves of the People’s Bank would be of little use in the event of a debt or banking crisis in China. The bulk of the costs of any clean-up would ultimately still be paid by the government. … FX reserves are no magic bullet in a …
25th June 2014
Today's PMI reading is the latest sign that downwards pressure on the manufacturing sector has eased as a result of the government's targeted measures, which have helped to support domestic demand. … HSBC/Markit Flash Manufacturing PMI …
23rd June 2014
Our China Activity Proxy (CAP) suggests that economic growth stabilised in Q2 and on this basis we expect official GDP growth to come in close to Q1’s 7.4% y/y. The weakness in real estate is deepening, but this is being offset by strength in other areas, …
20th June 2014
The People’s Bank (PBOC) further reduced its foreign exchange purchases to around $6bn in May, the lowest in almost a year. Given last month’s large trade surplus, this might suggest that capital inflows have finally reversed. A closer look reveals that …
18th June 2014
Tracking the stance of the People’s Bank has become more difficult as it has brought a large number of policy tools into play. But the consistent goal appears to be to stabilise credit growth. … What is the PBOC up …
16th June 2014
Today's output and spending data from China suggest that policymakers are being reasonably successful so far at fine-tuning policy in order to stabilise growth. We suspect that downward pressures from the property sector may intensify but, for now, there …
13th June 2014
Policymakers’ efforts to channel bank lending to chosen parts of the economy are helping to support loan growth, even as controls on shadow banking continue to bite. Although this has helped to stabilise credit growth, policymakers are likely to stop …
12th June 2014
Today's inflation data confirm our view that broader price pressures are stable and that concerns about deflation, sparked by a short-lived fall in headline inflation in April, were overplayed. … Consumer & Producer Prices …
10th June 2014
Details just published on the People’s Bank website about the targeted required reserve ratio cut that was first announced in late May underline how reluctant policymakers remain to pursue across-the-board easing in China. … Partial RRR cut illustrates …
9th June 2014
The unexpected contraction in imports last month probably overstates the weakness in domestic demand. While we believe that the cooling property sector is indeed weighing on commodity demand, May's weak headline import figure also reflects the ongoing …
In the past few weeks, policymakers have adopted an approach to supporting the economy that is the opposite of that followed in 2008. Then, banks were encouraged to flood the economy with credit. Now, policymakers are carefully metering the support they …
With both consumer and producer price inflation likely to have risen in May, there are few convincing signs that China is sliding into deflation. This should ease calls for the People’s Bank to roll out more aggressive monetary easing. … Inflation …
5th June 2014
The ongoing slowdown in the property sector is hitting land sales, which some have suggested has worrying implications for local government finances. We think the risks are being exaggerated and that land sales, and indeed the property sector as a whole, …
The People’s Bank has succeeded over the past few weeks in shifting expectations for the renminbi’s future path while also scaling back its foreign exchange accumulation. At first glance the data suggest that capital inflows have stalled. But a closer …
2nd June 2014
A third successive pick-up in the official PMI provides further evidence that conditions in manufacturing are improving, thanks to warming foreign demand and a rebound in infrastructure investment. With further measures to support small firms announced …
The renminbi appears to have stabilised in May as market participants have pared back expectations for the currency’s appreciation. Meanwhile, weaker demand for interbank funds, along with liquidity injections by the central bank, have kept market …
30th May 2014
Allowing local governments to issue bonds is a key step towards boosting transparency and encouraging stronger oversight over fiscal spending. But a broader rebalancing of the revenues and spending commitments of central and local governments is needed to …
22nd May 2014
Today's PMI reading suggests that downwards pressure on the manufacturing sector has eased markedly. It provides further evidence that stronger external demand, along with the rebound in infrastructure investment, is helping to moderate the pace of …
Rising non-performing loans (NPLs) at Chinese banks have been making headlines recently. So far the increase has not been much to get excited about. Official data suggest the NPL ratio has barely moved from a very low 1% and even if the true figure is, as …
21st May 2014
Our China Activity Proxy (CAP) suggests that, although heavy industry and real estate are showing signs of weakness, broader economic activity is holding up relatively well. … Property downturn yet to lead to broader …
Hong Kong’s economy slowed sharply in Q1, due to a slump in exports. However, the slowdown is likely to prove temporary, and we expect growth to rebound over the coming quarters as the global economic recovery gathers momentum. … Hong Kong GDP (Q1 …
16th May 2014
China’s economic growth is more likely to slow over the next couple of years than to accelerate, with the property sector in particular appearing on the cusp of a correction. But policymakers have tools at hand to support growth and prevent a slowdown …
13th May 2014
In the face of calls for stimulus, China’s government appears comfortable with a continued slowdown in credit growth. … Bank Lending & Broad Credit …
12th May 2014
Worries about deflation following the release of today’s price data from China are overdone. Last month's drop in consumer price inflation was due to a sharp fall of vegetable price inflation, which is likely to be short-lived. Producer price inflation …
9th May 2014
Today's trade data are more upbeat about the state of foreign demand than the recovery in the headline numbers suggests. If we strip out exports to Hong Kong and Taiwan, which were most affected by over-invoicing a year ago, then exports from China are …
8th May 2014
Headline inflation is likely to have dropped in April but is set to rebound this month, due to swings in food inflation. That said, the broader picture is that price pressures remain low and stable, and that inflation is unlikely to become a major concern …
6th May 2014
In recent months, Chinese policymakers have stressed repeatedly that employment growth, rather than rapid GDP growth, is their number one priority. This has led to speculation about how fast the economy needs to grow to ensure the employment target is …
2nd May 2014
Today’s second successive pick-up in the official PMI is another piece of evidence that economic conditions have stabilised somewhat recently. This should ease concerns of an imminent hard landing, though economic growth is still likely to weaken further …
1st May 2014
After large-scale intervention succeeded in weakening the renminbi and rattling many investors, there are tentative signs that the People’s Bank is now trying to introduce some stability. … Further RMB weakening tests the PBOC’s …
30th April 2014
Our China Activity Proxy (CAP) suggests that growth stabilised during the course of the first quarter. Nonetheless, we expect weakness in real estate construction to cause the economy to slow again over the coming quarters. … Downward pressures …
29th April 2014
Outbound tourism is becoming an important factor in China’s international payments balance, contributing to a deficit in services trade that is partially offsetting the goods trade surplus. … China’s tourism deficit offsetting surplus in goods …
25th April 2014
The outlook for China’s property sector is increasingly gloomy. The usual rebound in sales after Chinese New Year has been feeble, and the glut of unsold properties on developers’ books continues to grow. New projects starts plunged in Q1, which may …
24th April 2014
Today's PMI reading suggests that while conditions in the manufacturing sector continue to weaken, they are no longer deteriorating as rapidly as before. It adds to growing evidence that, with infrastructure investment picking up, the recent slowdown in …
23rd April 2014
Yesterday’s targeted cut in the reserve requirement ratio should not be read as a signal of a broader shift towards monetary loosening. The last thing that policymakers want to see is another credit fuelled rebound like in 2012, which would only serve to …
17th April 2014
The marginally stronger-than-consensus Q1 GDP data and broad stability in March growth figures suggest that concerns over the state of China’s economy are overdone. The economy is likely to weaken further on the back of slowing credit and property …
16th April 2014
A hard landing in China’s economy is one of the biggest risks clouding the outlook for the rest of Emerging Asia. A slump in Chinese demand would hurt economies with close trade links to China, with commodity exporters likely to be especially hard-hit. A …
15th April 2014
Despite a surge in bank loans and relatively loose interbank liquidity conditions in March, today's data show that the credit slowdown is still on track. Meanwhile, although the foreign exchange reserve figures hint at some success in deterring …
The introduction of a new scheme allowing global investors to access Shanghai’s equity market is China’s latest step to relax controls on its cross-border capital flows. The announcement gave a brief boost to Chinese equity prices, but the longer-term and …
11th April 2014
Despite a seasonal pick-up in food inflation, today's data provide further evidence that general price pressures remain subdued. … Consumer & Producer Prices …
