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The Capital Economics China Activity Proxy (CAP) suggests that the economy remained weak throughout Q1. The fading of a “leap year effect” made little difference: last quarter’s slowdown was not simply, as some have suggested, a statistical glitch. … Weak …
23rd April 2013
Talk in China of new subsidies to boost household spending is an unwelcome sign that officials may have been diverted by the recent disappointing growth numbers towards thinking of short-term fixes rather than more far-reaching structural reform. … …
18th April 2013
The release of China’s weak Q1 GDP data jolted markets worldwide. Consensus forecasts for 2013 growth have been lowered. The prospect of significant policy tightening, including benchmark rate hikes, has faded. But perhaps the biggest impact has been on …
Today’s weak GDP data shocked consensus expectations. The most striking detail is the degree to which growth remains dependent on an overstretched property sector and on policy support. … Hopes for sustained recovery …
15th April 2013
The stronger-than-expected rise in bank lending in March will reinforce concerns that credit growth is on an unsustainable path. Meanwhile, the People’s Bank has resumed its accumulation of foreign exchange reserves in an effort to keep the renminbi from …
11th April 2013
China’s exports cooled last month, correcting the surprisingly strong growth seen earlier this year. By contrast, imports beat expectations, and the increase appears to have been driven by stronger domestic demand. That said, with the lingering concerns …
10th April 2013
The larger-than-expected fall in headline inflation in March simply reflects the usual seasonal patterns stemming from the Chinese New Year. Looking ahead, inflation is likely to pick up again soon on the back of a probable rise in pork price inflation. …
9th April 2013
China passed a milestone last year as its working age population fell for the first time in the modern era. Demographic change will have a profound impact on the long-run trajectory of China’s economy. But the impact over the next five years or so that is …
8th April 2013
Consumer price inflation should have dropped back last month as the seasonal distortion caused by Chinese New Year faded. Looking ahead though, recent falls in pig numbers signal that another pork-price-driven pick-up in inflation is likely. … …
5th April 2013
The latest tightening of rules on wealth management products will help manage risks building up in China’s shadow banking system. But the long-term route to reducing risk is careful liberalisation of China’s strictly-controlled banking system. … China …
28th March 2013
The People’s Bank of China (PBC) sat on the sidelines of foreign exchange markets in 2012 with net purchases close to zero for much of the year. But it has burst back into the game, buying $56bn of foreign exchange in January and, according to our …
China’s equity prices have dropped since late February, bringing to an end the rally that started in early December. Meanwhile, the People’s Bank has resumed large-scale foreign exchange purchases to slow appreciation of the renminbi. … Equity rally …
26th March 2013
Today’s flash PMI from HSBC and Markit points to a rebound in manufacturing activity in March. The latest figures were stronger than expected but with other recent releases disappointing and the usual Chinese New Year uncertainty clouding the picture, it …
21st March 2013
The Capital Economics China Activity Proxy suggests that economic growth is slowing in the current quarter, much sooner than most had expected. … CAP points to surprise slowdown in …
20th March 2013
Confidence is rising, but business leaders in China are less upbeat about conditions for their own firms than they are about the wider economy. This suggests that sentiment may be running ahead of reality. Meanwhile, households are as reluctant as ever to …
19th March 2013
Premier Li Keqiang has taken office with pledges to tackle inequality, boost urbanisation and deal with vested interests. These are all major economic concerns. But longstanding China watchers may feel that they have heard it all before. They will require …
18th March 2013
Economic reform appears to be getting off to a slow start under the new leadership but moves to reduce government oversight of investment and other business operations suggest that it is at least moving on the right track. … New leadership edging …
14th March 2013
The weekend’s data releases suggest that China’s economic rebound is faltering sooner than expected, even by relative pessimists such as ourselves. … Economic rebound may already be …
11th March 2013
China’s exports were far stronger than expected last month. By contrast, import growth remains slow. In particular, the recent acceleration in domestic activity has done little to boost commodity import demand. … Demand strong from overseas but appears …
8th March 2013
Inflation will have spiked higher last month because of price rises ahead of Chinese New Year, but it should drop back in March. Looking further ahead, inflation is likely to rise but we think the government’s target of 3.5% average inflation in 2013 is …
7th March 2013
The annual meeting of China’s parliament, the National People’s Congress, starts on Tuesday. Expectations, as usual, are low. This year though, with a new leadership keen to project an energetic image, it may be more eventful than in the recent past. With …
4th March 2013
Seasonal factors may have played a part, but the weakness of China’s two manufacturing PMIs last month cannot entirely be explained by the timing of Chinese New Year. They suggest that the economic rebound is losing steam. … Manufacturing PMIs (Feb. …
1st March 2013
A slowdown in property construction was the main reason that China’s economy slowed last year. Even so, the sector remains on an unsustainable path. It may be years before policymakers can sensibly start thinking of relaxing controls on property purchases …
28th February 2013
Hong Kong’s economy grew at its fastest pace in nearly two years in Q4, thanks mainly to a pick up in export growth. Prospects for the economy depend largely on the outlook for global demand. As such, a strong and sustained recovery in Hong Kong is more …
27th February 2013
Today’s worse-than-expected flash manufacturing PMI from HSBC and Markit dampens hopes of a continued economic acceleration. Even allowing for distortions around Chinese New Year, it appears that the rebound is faltering. … HSBC/Markit Flash …
25th February 2013
Global copper mine supply grew at its fastest rate in eight years in the closing months of 2012 and mine output is likely to grow just as quickly this year. This should enable smelters to raise their output, but it will also add to the stockpiles of …
21st February 2013
This is the first edition of a new publication for clients of our China service. The China Markets Monitor will provide a monthly summary of developments in financial markets in mainland China and Hong Kong along with key forecasts. The rally in China’s …
20th February 2013
Four years after China’s economy was rescued by a huge loan-fuelled stimulus, its economic growth continues to be shored up by an unsustainable dependence on credit. … Hooked on …
15th February 2013
China’s current account surplus edged up last year both in dollar terms and relative to the size of the global economy. We suspect that further increases lie ahead as China’s investment spending slows. Meanwhile, the latest data show that the People’s …
14th February 2013
Policymakers will pay little attention to last month’s drop in inflation or the acceleration in exports, given the usual volatility around Chinese New Year. But a surge in off-balance-sheet bank lending may be a concern for officials who, it appears, had …
8th February 2013
The usual rollercoaster around Chinese New Year will have caused inflation to fall in January before sending it soaring this month. Once the seasonal volatility has faded, current evidence suggests inflation will be revealed to be on a mild upward trend. …
7th February 2013
With the People’s Bank determined to limit renminbi appreciation but reluctant to add to its foreign currency reserves, China’s commercial banks have taken on the role of the economy’s foreign exchange buyers of last resort. This cannot last. … Why are …
4th February 2013
China’s official PMI slumped last month, but this index is often choppy around Chinese New Year. We would put more weight on the continued rise in the alternative PMI from HSBC and Markit, as well as our own China Activity Proxy. … Manufacturing PMIs …
1st February 2013
The Capital Economics China Activity Proxy (CAP) points to a sharper economic turnaround than the official figures showed towards the end of last year. In the detail, data on cargo volumes back up disputed customs figures showing export strength. … …
30th January 2013
The Shanghai Composite index has risen 17% since early December. Even so, a trailing price/earnings ratio under 13 and the backdrop of a strengthening economy suggest that prices could rise much further. The large number of potential investors still on …
24th January 2013
Today’s better-than-expected flash manufacturing PMI from HSBC and Markit supports the view that China’s recovery is continuing at the start of the year. But distortions around Chinese New Year mean the latest data are less reliable than usual. … …
Wide income inequality in China is undermining economic stability as well generating concerns about social tensions. … Income inequality is an economic as well as social …
21st January 2013
Today’s Q4 GDP data confirm the turnaround in China’s economy but they show too that it is reliant on the single engine of investment. Continued policy easing would be needed to prolong the acceleration through 2013 but this seems unlikely to happen. As a …
18th January 2013
We are sceptical that published FDI data tell us much about China’s economic outlook. For what it’s worth though – and contrary to the headlines – today’s figures suggest the China is increasing its share of global FDI. They certainly do not imply that …
16th January 2013
Freezing weather drove food prices and inflation higher last month but, as we head into the Chinese New Year period, underlying price pressures appear subdued. … Consumer & Producer Prices …
11th January 2013
There were signs of strengthening developed world demand in China’s latest export data. Stronger growth in China is being reflected in rising imports. But with credit growth levelling off, a strong and sustained economic rebound does not seem likely. … …
10th January 2013
Property construction in China still needs to slow further to return the real estate sector to a sustainable path. Accordingly, the recent pick-up in investment by developers should not be welcomed, whatever the short-term boost to the economy. … …
9th January 2013
December’s data will give us the last “clean” view of inflation before price volatility around Chinese New Year obscures the picture. They are likely to show that consumer price inflation is rising, in part thanks to warming economic conditions, but that …
4th January 2013
China’s economy is recovering, but the Capital Economics China Activity Proxy (CAP) points to a less emphatic rebound than some recent commentary might suggest. Data available so far are consistent with Q4 GDP growth of about 7.6% y/y on the official …
20th December 2012
Business confidence in China has recovered slightly though it remains subdued. Banks are eager to lend but firms show little appetite for loans. Meanwhile, households are increasingly optimistic and expect inflation – and property prices – to rise in the …
18th December 2012
Hong Kong’s unemployment rate remains low despite the weak economy, as employers have responded to falling demand by cutting wage growth. The result has been a slowdown in consumption. Even if unemployment remains low in 2013, domestic demand is still …
China’s new leadership has raised expectations for economic policy reform in 2013 but, judging from the outcome of the Economic Work Conference that just concluded in Beijing, it has not yet decided on any major new initiatives. … Reform expectations …
17th December 2012
The nightmare scenario of the US Congress failing to reach a deal on the fiscal cliff would see growth in Asia’s most trade-dependent countries slow by up to 1 percentage point in 2013. … The US fiscal cliff: implications for …
Today’s upbeat flash manufacturing PMI from HSBC and Markit suggests that China’s recovery is continuing in the last few weeks of 2012. But a high level of inventories is continuing to weigh on output and, barring some change of course by policymakers, we …
14th December 2012
The release later this month of government proposals to reduce income inequality will provide early evidence of whether a change of leadership in Beijing has given new momentum to economic reform. The plan has been eight years in the drafting, but earlier …
13th December 2012
