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August’s data confirmed that the economy has turned a corner. Industrial output growth was the strongest since spring last year. Investment and exports also gathered pace. It is notable though that, as in 2009, heavy industry and state owned firms are …
18th September 2013
The free trade zone about to be set up in Shanghai is intended as a testing ground for new policies, with a focus on liberalising the service sector, and financial services in particular. Successful innovations will ultimately be rolled out nationwide, …
13th September 2013
Today’s data releases give further evidence that China’s economy is picking up speed. But the rebound is skewed towards investment, with state-led spending on infrastructure particularly strong. The latest figures also suggest that the slowdown in credit …
10th September 2013
Today’s inflation data added no additional pressure for monetary tightening while the weekend’s export data provided further evidence of a revival in foreign demand. … Encouraging signs on inflation and foreign …
9th September 2013
Consumer price inflation stabilised over the summer and, while it is still likely to rise later in the year, the outlook is even more benign than we had anticipated a few months ago. We are lowering our inflation forecasts for both this year and next. … …
6th September 2013
After some slightly mixed signals in July, August’s pick-up in both manufacturing PMIs leaves no doubt that China’s manufacturing sector has witnessed a rebound. It still appears though that the recovery is credit-fuelled and investment-driven, which …
2nd September 2013
High hopes are being pinned on interest rate liberalisation to inject some vitality into China’s economy. But the full gains from liberalisation will only be realised if the government is willing to allow state-owned borrowers to fail. This is still far …
30th August 2013
China’s financial markets have remained stable in August despite the turmoilelsewhere thanks to capital controls and the release of some positive economic data.However, Hong Kong equities have suffered along with others in the region. … China bucks …
29th August 2013
The strong rebound in August’s flash PMI should reassure even the most bearish that China has avoided an imminent hard-landing. We continue to believe however that the rebound will prove short-lived and that a further slowdown lies ahead. … HSBC/Markit …
22nd August 2013
The latest Capital Economics China Activity Proxy (CAP) suggests that economic conditions have started to thaw across key sectors of the economy. … Broader signs of …
21st August 2013
Hong Kong GDP figures for the second quarter show the economy remains subdued. Over the next couple of years, with the global economy set to stage a gradual recovery, Hong Kong should see a modest pick-up in the pace of growth. … Growth in Hong Kong set …
16th August 2013
There has been an increase in the value of non-performing loans (NPLs) in the banking system since Q3 2011, as the economy has slowed. At face value, this problem does not yet appear too serious, given that NPLs are less than 1% of outstanding loans, …
15th August 2013
There is growing speculation that China’s one-child policy could be eased later this year. However, the economic impact of any change in the policy is likely to be relatively small. … Easing of one-child policy unlikely to alter growth …
13th August 2013
Today’s data releases provide further evidence that China’s economy is improving. However, the rebound has been driven by investment spending and fuelled by rapid credit growth earlier this year. A recovery built on these foundations is unlikely to last. …
9th August 2013
The rebound in both China’s exports and imports in July was bigger than most had expected. On the export side, there are signs that foreign demand is recovering.Meanwhile, the import data provide further evidence that investment is picking upfollowing a …
8th August 2013
Continued increases in pork and vegetable prices look likely to have driven consumer price inflation higher in July. Further rises probably lie ahead. … Inflation Monitor (Jul …
5th August 2013
China’s economy is set to slow further over coming years but we believe that the slump in growth many are now predicting will be avoided. … How close is China to a …
1st August 2013
July’s rise in the official manufacturing PMI was unexpected, and it stands in contrast to the fall in the HSBC/Markit index which was also confirmed today. But the increase did not come completely out of the blue. The official index gives a large weight …
While the Hang Seng index has rebounded significantly in July, equity prices in Shanghai have changed little, although the cash crunch has passed. Meanwhile, the renminbi has been kept stable. … Interest rate liberalisation hurts financial …
31st July 2013
If China has dropped into deflation, as many now claim, one implication is that stimulus would succeed in driving a sustainable economic rebound. But evidence of deflation is weak, at best. This is another reason to believe that the economic slowdown so …
30th July 2013
China’s forthcoming audit of government debt will shine a welcome light on a murky part of the economy. Based on what we know at present, the overall government debt situation has actually improved in recent years. The growth of corporate debt is, to our …
China’s flash PMI for July was, again, worse than most had expected. There was little in the breakdown to suggest that conditions might soon turn around. That said, other, broader measures of activity have been less downbeat recently. … HSBC/Markit Flash …
24th July 2013
The Capital Economics China Activity Proxy (CAP) suggests that economic activity regained some momentum in June. This may disappoint those hoping for a stimulus response to the slowdown, while also assuaging concerns about a hard landing. … Better news …
23rd July 2013
Credit growth slowed last month, a sign that the cash crunch delivered some of what policymakers were hoping for. But credit is still expanding more than twice as fast as economic output, which means that a further slowdown will be needed to bring credit …
19th July 2013
We are deeply sceptical of the argument that the renminbi now needs to weaken to reach its market value. On the contrary, we continue to expect it to edge higher this year and make further gains in the years ahead. … Renminbi set to climb further this …
China’s Q2 GDP data underline the extent to which Asia’s economic landscape has shifted. We expect growth in China to continue to slow over the next couple of years. For India, the worst of the downturn may already have passed and policymakers’ …
17th July 2013
With today’s GDP data squarely in line with consensus expectations we would focus on two other points, one encouraging, the other less so. The good news is that the labour market remains healthy,with real migrant wages rising at a double digit rate. The …
15th July 2013
Confusion over where the government’s “bottom line” for GDP growth lies suggests that officials may be less fixated on meeting the annual growth target than many outside observers think. Their main concern instead is probably employment. We would not be …
12th July 2013
Round one in the fight between policymakers and lenders has gone to the former. Outstanding credit growth has slowed. But the key, as yet unanswered, question is whether the slowdown will continue now that the cash crunch has passed. … Lending & …
China’s commodity imports were stronger than overall trade in June, but were still weak in the first half of 2013 overall. What’s more, China is shifting to a lower and less commodity-intensive growth path over the next few years. … China’s commodity …
10th July 2013
China’s exporters in June had their worst single month since the depths of the financial crisis. Efforts to crack down on illicit cross-border capital flows may have played a large part, but the weakness was not confined to areas where over-invoicing was …
June’s pick-up in consumer price inflation was the result of increases in vegetable and pork price inflation. Core inflation fell. Looking ahead, although vegetable price inflation may now stabilise, inflation in pork prices is likely to continue to push …
9th July 2013
Consumer price inflation probably picked up in June. It is likely to continue rising in coming months but not by enough to cause alarm, given the state of the economy and the likelihood that credit growth is now set to slow. … Inflation Monitor …
8th July 2013
China’s policymakers finally seem willing to tackle the economy’s structural imbalances. This reduces the threat of an abrupt slowdown in GDP growth further down the line, but it also means that China’s growth is likely to be far weaker over the next few …
4th July 2013
Today’s PMIs suggest that firms weathered the cash crunch well and, with interbank rates now dropping back, it may appear that the crisis has passed. But a slowdown in credit growth and greater uncertainty among firms about the ease of access to credit …
1st July 2013
Equity prices in Shanghai have fallen sharply since early June. The primary cause is the cash crunch in China’s interbank market rather than increasing concerns about Fed’s policy. Meanwhile, the renminbi has been allowed to depreciate. … Financial …
28th June 2013
China’s cash crunch has shone a spotlight on its interbank market, which investors without a close interest in China’s banking and financial sector previously paid little attention to. In this month’s China Watch , we give a brief primer on the interbank …
27th June 2013
There are some positives to be drawn from China’s cash crunch. The episode is arguably the strongest sign yet that the leadership is willing to suffer short-term economic pain if necessary to achieve more sustainable growth. But there are concerns too …
24th June 2013
Businesses remain relatively confident about the economy overall but, when it comes to their own situation, they have recently turned much more downbeat. Meanwhile, Chinese households are as reluctant to spend as ever and they have turned cool on the …
21st June 2013
The May reading of the Capital Economics China Activity Proxy (CAP) suggests that growth has continued to slow in y/y terms. With no rebound yet apparent, we are revising down our forecasts for GDP growth both this year and next. … Q2 GDP growth to …
20th June 2013
Today’s worse-than-expected reading on China’s flash PMI gives a further reason to expect GDP growth to slow this quarter. Policymakers care more about the state of the labour market than the headline GDP number and won’t be panicking. But the continued …
Short-lived cash crunches in China are not unusual. But the fact that the People’s Bank has allowed the current crunch to persist so long when economic growth remains weak signals the depth of its concern about China’s credit expansion. … Cash crunch …
19th June 2013
The high profile data releases of the last week have provided little evidence that growth in China is picking up, even though credit has now been expanding at a rapid pace for several months. But there are glimmers of hope in less closely-watched …
13th June 2013
The key message from China’s May data is that there is no clear evidence of an economic rebound getting underway. Most of the commentary has focused on the impact on exports of more stringent controls on trade invoicing. Our analysis suggests there was …
10th June 2013
Consumer price inflation was probably little changed in May, but it is likely to pick up over the rest of the year as pork prices look to have bottomed out. … Inflation Monitor …
5th June 2013
China’s two manufacturing PMIs moved in opposite directions in May, with the official index above 50 and rising and the HSBC/Markit index dropping below 50. The second of these is more representative of the manufacturing sector and a better guide to the …
3rd June 2013
Six months after China's leadership transition there are encouraging signs that policymakers are embracing the need for significant economic policy reform. In this China Watch we review the progress made so far and also preview the data releases in the …
29th May 2013
China’s equity prices have recovered somewhat this month. Meanwhile, the renminbi has been allowed to appreciate at a faster pace. … Property stocks lead rebound …
27th May 2013
The recent surge in the renminbi may have been an attempt by policymakers to lay the groundwork for a loosening of capital controls. But it has ended up demonstrating why such a move will be difficult any time soon. There is a good chance that the last …
24th May 2013
Today’s sub-50 reading on the flash PMI will shake the confidence of China’s policymakers, who have remained sanguine in the face of slow growth so far this year. We suspect they will resist the temptation to inject further stimulus since this would …
23rd May 2013
