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The Capital Economics China Activity Proxy (CAP) confirms that the economy took an abrupt turn for the worse in April. The government is now ramping up its stimulus but the impact will come too late to stop this quarter’s GDP growth rate falling further. …
23rd May 2012
The data for April were appalling. Economic activity was much weaker than expected across a wide swath of the economy, with imports, industrial output and fiscal revenue hit particularly hard. Optimists can point to two factors. First, there were fewer …
16th May 2012
This weekend’s policy move by the People’s Bank is likely to be the precursor to a more explicitly pro-growth stance from China’s government. April’s awful data suggest that officials so far this year have been too sanguine about the state of the …
14th May 2012
Hong Kong’s economy had a weak start to the year, expanding in Q1 at the same tepid pace as in Q4 and confounding hopes that growth would accelerate. We think growth will probably pick up over the rest of 2012 but, given global uncertainties, a strong …
11th May 2012
Just about everything in China’s economy seems to have gone backwards in April. Growth of retail spending, investment, industrial output and imports declined. Lending slowed. On the positive side, inflation fell too. Even if it hadn’t, today’s raft of …
Imports were far weaker than expected last month, raising questions about the strength of domestic demand at the start of Q2. … Foreign Trade …
10th May 2012
Consumer price inflation probably fell back slightly in April. Reforms to the pricing of water, electricity and gas will probably push up non-food inflation over coming months, but not by enough to affect the pace of policy easing. … Inflation Monitor …
8th May 2012
Policymakers’ attempts to stimulate China’s economy have so far centred on increasing the amount that banks can lend. But many are concerned that weak loan demand is hampering these efforts. In this China Watch we look at these fears and ask whether weak …
4th May 2012
The final release of the HSBC/Markit manufacturing PMI today turned up some surprises, with new orders much stronger than on the flash estimate and employment far weaker. The headline PMI rose, but the gaping disparity with the alternative official index …
2nd May 2012
Today’s continued pick-up in China’s official PMI adds to the evidence that conditions in manufacturing have stopped deteriorating. But this survey is skewed towards larger firms and so probably exaggerates the sector’s recent strength. … Official …
1st May 2012
It was not hard to find evidence of economic weakness in China in Q1. Imports, retail spending, property sales and, of course, GDP growth all slowed. But there were glimmers of a turnaround towards the end of the quarter. Electricity output growth …
26th April 2012
The Capital Economics China Activity Proxy (CAP) suggests that the economy was weaker than official GDP figures show in Q1, but there are signs in March’s data that the economy is close to bottoming out. … Q1 weak, but better in …
24th April 2012
China’s flash manufacturing PMI for April rose, but the small increase will have disappointed anyone hoping for a clear signal that the economy is bottoming out. … HSBC/Markit Flash Manufacturing PMI …
23rd April 2012
The immediate impact of a wider renminbi trading band on the exchange rate will be small, we suspect, but the reform is an important signal of renewed momentum behind economic policy liberalisation. … What should we make of the widened renminbi …
16th April 2012
China’s growth continued to slow in Q1. But there were some clues in the latest data that the economy is bottoming out and, with the State Council giving a strong signal today that credit policy will be loosened further, we think it likely that growth …
13th April 2012
Much stronger-than-expected lending in March adds to the likelihood that tomorrow’s Q4 GDP figures will be reassuringly strong and signals that policy easing is starting to have an effect. Meanwhile, China’s foreign exchange reserves have hit a new high. …
12th April 2012
Given China’s failure to rein in investment-led growth, its current account surplus is likely to rebound both in dollar terms a year or two from now and relative to its own GDP too. Relative to world output, China’s surplus and the resulting drag on …
The results of China’s largest quarterly business survey, released today, reinforce the view that economic activity weakened in Q1, but also suggest that many firms have turned more positive about the outlook. … NBS business conditions survey …
10th April 2012
March’s trade figures from China paint a picture of slow but steady growth in global demand alongside further weakening at home. … Foreign Trade & CPI …
The increase in the amount of funds foreign investors are allowed to invest in China’s financial markets is the latest in a series of steps that relax controls on cross-border capital flows. The move may help to lift equity prices in the short-term, but …
4th April 2012
Consumer price inflation may have edged up in March, but this would still largely reflect volatility around Chinese New Year. The recent increase in gasoline prices should have little impact on the overall CPI. We still think headline inflation will fall …
The divergence between China’s two manufacturing PMIs for March, released over the weekend, largely reflects the seasonal strength and perhaps a bias towards larger firms in the official index. On balance, we think conditions in the sector are still soft. …
2nd April 2012
The next major reform in China’s exchange rate policy is likely to be a widening of the renminbi’s daily trading band with the dollar. In this month’s China Watch, we consider the implications of such a shift. … What difference would a wider RMB trading …
29th March 2012
As China develops, its manufacturing firms are moving into higher-value sectors. While this is a boon for low-wage Asian economies that represent a good alternative for low-end producers, manufacturers in middle-income countries will face sterner …
China’s share of the world’s low-end exports has started to fall. This reflects a shift by Chinese producers into sectors where margins are higher rather than a failure to compete. China’s export prices are rising in dollar terms, but slower than the …
28th March 2012
The Capital Economics China Activity Proxy (CAP) suggests that the economy slowed in the first two months of the year after a short rebound in December. … Economy not recovering …
26th March 2012
Today’s downbeat flash PMI figures suggest that conditions in China’s manufacturing sector are still weak. However, fears about a hard landing look overdone. … HSBC/Markit Flash Manufacturing PMI …
22nd March 2012
The data for the first two months of the year were in general downbeat. Everything from imports to electricity and cement production slowed. Still, Q1 was always likely to be weak. Policy loosening only got underway in early December when the first …
21st March 2012
Business confidence in China has perked up this quarter, although demand has continued to slow. Meanwhile, a smaller share of people think property prices are excessive now than a few months ago but few see themselves buying in the near future. … The …
20th March 2012
Regardless of which candidate wins the election on Sunday, the new chief executive will face a series of challenges as Hong Kong grapples with how best to deal with slowing exports, rising inequality, and a bubble-prone property market. … Key challenges …
19th March 2012
Today’s comments from Premier Wen Jiabao at the close of the National People’s Congress have sparked interest in the outlook for China’s property and exchange rate policies and in the prospects for political reform. What conclusions should we draw? … …
14th March 2012
Exports to the US were a bright spot, but the general picture from China’s latest trade data is that global demand is still subdued. What’s more, imports have grown only slightly faster than exports so far in 2012. A sharp slowdown in imports for domestic …
12th March 2012
The implications of China lowering its growth target have, in our view, been widely misunderstood. The lower target will have no direct impact on policy. Slower growth in China’s economy would also not necessarily mean that China was less supportive to …
Today’s spending and output data were disappointing, suggesting the apparent turnaround at the end of last year has already run out of steam. There are clouds on the horizon too: property sales are well down on a year ago and residential project starts …
9th March 2012
We think consumer price inflation dropped significantly in February. We expect further small falls to the middle of the year, which will provide room for more policy easing. Oil prices at their current level are not a big concern. … Inflation Monitor …
7th March 2012
The opening day of the National People’s Congress has thrown up a new growth target – exactly as expected – and confirmation that the government is holding the line on property market controls. … Key takeaways from the National People’s …
5th March 2012
China’s budget planners have a history of wildly underestimating revenue growth, usually making actual net spending by the government far less supportive to the economy than originally planned. The proliferation of fines and fees not included in the main …
The annual meeting of China’s parliament, the National People’s Congress, starts on Monday. In this China Watch, we highlight the key issues. We also preview forthcoming data releases. We expect them to show a big drop in inflation and a hefty trade …
2nd March 2012
A third consecutive increase in both of China’s manufacturing PMIs should dispel any lingering concern about an imminent hard landing. But with a post-Chinese New Year rebound in hiring and activity accounting for a large part of the latest rise, the …
1st March 2012
China is slowly relaxing its capital controls but unfettered cross-border flows won’t be allowed until the currency floats and the financial sector has been overhauled. This could take a decade, but with many senior officials still ambivalent about the …
24th February 2012
The flash PMI released today suggests that conditions in manufacturing have stabilised but are relatively subdued. Foreign demand appears to have weakened. … HSBC/Markit Flash Manufacturing PMI …
22nd February 2012
Nearly three months after the People’s Bank signalled a shift in stance and first cut the required reserve ratio, policy remains tight. Admittedly, benchmark interest rates never climbed back to the levels they were at before the last round of easing …
21st February 2012
The weekend cut to reserve requirements was so long in coming that some investors had begun to question whether the People’s Bank was really committed to policy loosening at all. We believe it is, though officials are treading carefully, and that several …
20th February 2012
Data released on the eve of Vice President Xi Jinping's visit to the US show that China's current account surplus has continued to tumble. But plenty of potential sources of trade friction remain. … Current account surplus falling but trade frictions …
14th February 2012
We draw two very tentative conclusions from today’s lending and trade data: domestic demand is still slowing and the pace of policy easing is very slow. … Lending & Foreign Trade …
10th February 2012
China is undergoing a major shift in its labour market as the surplus of rural workers dries up. But, after delving into the details, we conclude that several factors will dampen the speed at which the macroeconomic impact is felt. Perhaps most important, …
9th February 2012
The distortion caused by Chinese New Year contributed to the higher-than-expected headline consumer price inflation in January but it will also bring February’s figures down markedly. We do not believe that the trend of fading inflation has changed. … …
Consumer price inflation was probably little changed in January but it is still likely to be much lower in a few months’ time. … Inflation Monitor …
8th February 2012
The economies of Asia and Latin America should be able to weather any financial contagion stemming from Europe’s debt crisis. But the economies of emerging Europe – notably Hungary, Turkey and the Balkan countries – look far more vulnerable to possible …
6th February 2012
The Capital Economics China Activity Proxy (CAP) provides further evidence of a spurt in economic activity at the end of 2011. But property construction does seem to be slowing and, for that sector at least, worse lies ahead. … Property crumbling, but …
