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The latest PMIs provide further evidence that China’s economy is slowing, increasing the likelihood that policy will be loosened during the next few months. … PMIs …
2nd August 2010
Rising non-performing loan levels are very unlikely to trigger a banking crisis in China, but measures taken to clean up bad debt may hold back economic growth and the pace of rebalancing. … How significant is the non-performing loan …
29th July 2010
China is seeking to rein in bank lending and hold to a conservative fiscal stance while maintaining rapid economic growth. It cannot do all three. … China’s impossible …
27th July 2010
The Capital Economics China Activity Proxy (CAP) suggests that commodity-intensive heavy industry is slowing, but other sectors are helping to cushion the downturn. … Heavy industry leading …
21st July 2010
China’s Q2 GDP growth was in line with our expectation, but unexpected weakness in the June activity data suggests the government may be forced to loosen policy sooner than originally thought. … Downside risks to growth …
15th July 2010
The renminbi has virtually stopped moving against the dollar over the last fortnight and is actually weaker in trade-weighted terms than it was when currency reforms were restarted just under a month ago. Market talk of a shift to a currency basket seems …
14th July 2010
Investors are increasingly focused on signs that China’s economy is slowing. In fact, q/q GDP growth probably peaked as long as a year ago when the full force of government stimulus was being felt. But the slowdown is continuing and we expect the …
13th July 2010
China’s foreign exchange purchases slumped in Q2, but will probably pick up again as the trade surplus rises in the second half of the year. … Slowdown in reserve accumulation unlikely to …
12th July 2010
Confidence has collapsed in real estate, but firms in other sectors remain upbeat about current conditions and the outlook. … NBS business conditions survey …
9th July 2010
Inflation might have risen again last month but the peak is probably not far away. … Inflation Monitor (Jun.) …
8th July 2010
Plans for new investment in Western China probably do not constitute a new stimulus, but should temper concerns that tighter rules on local government project financing will lead to a slump in investment. They also highlight that there is still space for …
Current concerns about China’s slowdown are more justified than the previous fears of overheating. The government will probably loosen policy towards the end of the year, helping to maintain growth at 8% or thereabouts. But this relapse into policy …
6th July 2010
The negative reaction to what was in other respects an unimportant downward revision to the Conference Board’s leading indicator for April probably says more about the fragility of market confidence than the state of China’s economy. Our own China …
1st July 2010
China no longer has a surplus of underemployed workers in the countryside willing to move elsewhere for rock bottom wages, but it does still have a large and inefficient agricultural workforce. Their continued migration into manufacturing and services …
29th June 2010
The Capital Economics China Activity Proxy (CAP) suggests that GDP growth slowed to a little over 10% y/y in the second quarter. A soft landing appears to be underway, although weakness in construction activity points to downside risks. … On course for a …
28th June 2010
In the first week after the People’s Bank (PBC) decided to “proceed further” with exchange rate reform, the renminbi strengthened a total of 0.5% against the dollar. A little under half of those gains were delivered by the PBC setting the currency’s …
25th June 2010
With expectations for the pace of future renminbi appreciation low, speculative capital flows into China are unlikely to take off. Even if they do, the People’s Bank is capable of responding effectively. … Hot inflows not likely to be a major …
23rd June 2010
The financial crisis has left many reputations looking rather tattered. China’s policymakers are among a small group who have emerged with their standing enhanced. Acting boldly and swiftly, they not only insulated China’s economy from the worst of the …
22nd June 2010
The renminbi came close to breaching the People’s Bank 0.5% trading band against the dollar today, however such strong gains are unlikely to be a sign of what is to come. Indeed, when currency reform last restarted, in 2005, the renminbi gained only 1.0% …
21st June 2010
Proof will come in the next day or two, but the decision of the People’s Bank to “proceed further” with exchange rate reform almost certainly means the renminbi’s hard dollar peg is at an end. … Renminbi reform …
20th June 2010
There may be 31 million fewer Chinese aged under 15 than previously thought. If so, the number of young workers will soon be falling rapidly, putting sustained upward pressure on wages. … How many young workers are …
18th June 2010
China’s businesses and banks are still confident and do not think the economy is overheating, but consumers are unhappy about prices and wages and reluctant to spend. Mortgage demand is down and few expect house prices to keep rising. … The view from the …
17th June 2010
Rapid wage increases may play a big role in rebalancing China’s economy in the years ahead. In the short term though, they are no substitute for nominal currency appreciation. … Do wage increases reduce the need for currency …
15th June 2010
Consumer price inflation has just edged above 3% but with price pressures still low and output growth already slowing, there is no pressing need to tighten policy. Indeed, we no longer expect interest rates to be raised at all this year. … Diminishing …
11th June 2010
Today’s confirmation that exports surged in China last month makes an early move on restarting currency reform more likely and should also dampen fears that the economy is heading into an abrupt slowdown. … External Trade …
10th June 2010
Big wage increases in China are stoking concern about inflation and corporate profitability. But they represent catch-up after two years in which wage growth was weak. Furthermore, double-digit increases should not in themselves be any cause for concern. …
9th June 2010
Inflation probably rose to 3% in May, but the bigger picture is that the threat of overheating already appears to be dissipating. We now expect inflation for the year as a whole to come in below the government’s 3% annual target. … Inflation Monitor …
7th June 2010
We expect a big rebound in Chinese equity prices in the second half of 2010 as fears about policy tightening wane and the economy heads to a soft landing. However, rising prices will not give much of a boost to spending in China. Markets elsewhere may …
3rd June 2010
China’s two purchasing manager indices are – for once – telling a similar story of slowing growth and easing price pressures. However, growth still appears fairly strong. The key message is that overheating fears are set to retreat. … PMIs …
1st June 2010
A few weeks ago, the common view was that China was overheating and so heading for a crash. (We strongly disagreed.) The mood now seems to be shifting, partly due to worries about the global outlook. The crash may or may not be coming but – according to …
28th May 2010
How much progress has there been in efforts to rebalance China’s economy? US Treasury Secretary Tim Geithner is positive, saying that “it looks as if there has been a durable shift towards domestic consumption in China”, according to a report in the …
27th May 2010
Markets have reined in even further their expectations of renminbi appreciation and are now pricing in a meagre 0.6% gain against the dollar over the next 12 months. That is surely too little. Indeed, the fact that the US side chose to sidestep the issue …
25th May 2010
The Capital Economics China Activity Proxy (CAP) suggests that growth has slowed to near China’s sustainable rate. Headline GDP growth will drop to a similar pace over the quarters ahead, without any need for drastic policy intervention. … Overheating …
24th May 2010
Worries about Europe have prompted us to revise down our forecasts for the renminbi’s future pace of gains, but we still expect appreciation against the dollar to resume at some point between next week’s Strategic and Economic Dialogue with the US and the …
19th May 2010
Hong Kong’s economy maintained a strong pace of growth in the first quarter. As long as the global recovery continues, Hong Kong should beat most expectations over the rest of the year. … Hong Kong GDP …
14th May 2010
Inflation pressures remain low in China. There are signs in the April data that the boost that stimulus policies have provided to consumer spending is easing. But for now, the recovery still looks strong. … No sign inflation is picking …
11th May 2010
Contrary to some suggestions doing the rounds in the media and the markets, China’s central bank has not shifted its position on exchange rate policy in its latest quarterly report. … Is the People's Bank signalling a policy …
10th May 2010
China’s trade surplus reappeared in April and looks set to rise over the rest of the year. Against this backdrop, worries about the fallout from the Greek debt crisis are unlikely to delay a return to renminbi appreciation against the dollar, although …
Tomorrow’s inflation data are likely to show a rebound in the headline rate in April. But a close look at recent trends suggests that inflationary pressures remain weak. With the economy set to slow over coming quarters, inflation should stay contained. … …
After a poor start to 2010, equity markets in China have weakened further with the launch in earnest of a government campaign against property speculation. The government’s decision to focus on bringing the property market into line arguably makes broader …
7th May 2010
Fears that China is about to slam the brakes on its economy are overdone. Overheating is a far smaller threat than is commonly supposed and policy tightening will be implemented only slowly. … Is China shifting …
6th May 2010
China’s two PMIs are again giving conflicting messages on the state of the economy. About the only thing they agree on is that input prices have accelerated. But as long as manufacturers are not passing these price rises on to consumers, the inflation …
4th May 2010
Events in China and Europe this month have reduced the chances that China will raise interest rates in May, as we had expected. A first hike may now wait until the fourth quarter. … Interest rates likely to remain on hold until …
30th April 2010
The surge in China’s copper imports last month has been taken by some as evidence that final demand is booming. But with inventories at unprecedented levels, import demand looks set to tail off again. … What should we make of China’s surging copper …
29th April 2010
Our China Activity Proxy (CAP) suggests that China’s economy expanded more last quarter in y/y terms than the official GDP figures showed. But q/q growth is a better guide to the strength of the economy today. On this measure the pace of growth has …
23rd April 2010
China’s attempt to crack down on speculative activity in its property markets does not signal that a property bubble is either inflating or about to burst. The new measures should help to tame price rises in those hotspots where recent gains have been …
21st April 2010
At first glance, today’s GDP data might suggest China is overheating. However, the acceleration in y/y growth in Q1 was entirely due to weakness a year ago. Growth has continued to slow in q/q terms and the economy is now expanding at an unremarkable …
15th April 2010
The death toll from today’s earthquake in Western China is likely to rise as more details come in. The affected region is among China’s poorest and, perversely, rescue and recovery efforts could end up giving a small boost to national GDP. The extreme …
14th April 2010
Speculative inflows into China’s economy were weak in the first quarter, but they seem to have picked up in the last few weeks as expectations have strengthened that the renminbi’s appreciation against the dollar is about to resume. … How strong are …
12th April 2010
China’s first monthly trade deficit in six years might win it some respite from pressure to do more over its exchange rate, particularly if followed, as we expect, by a resumption of renminbi appreciation in the next few weeks. But the calm won’t last. …
10th April 2010
