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Property developers on the brink. A slip into deflation. Activity at a standstill. Markets are growing nervous as bad news piles up around the Chinese outlook, but how grim is the economic situation? Is another recession on the cards? Are defaulting …
15th August 2023
This page has been updated with additional analysis and charts since first publication. Growth has slowed to a crawl All the main activity indicators undershot consensus expectations in July, with most either stagnant or barely expanding in m/m terms. And …
This page was first published on Tuesday 15 th August, covering the reduction to the Medium-term Lending Facility rate. We added commentary following the cut to the 1-year Loan Prime Rate on Monday 21 st August. LPR follow-up disappoints after largest MLF …
Exports may be weaker than they appear China’s exports fell 14.5% y/y in July, undershooting the analyst consensus. But given the sharp fall in export prices recently, what’s more surprising to us is that export values haven’t fallen even more. On paper, …
11th August 2023
This page has been updated with additional analysis since first publication. Downturn deepens as borrowers hold back China’s bank loan growth fell to its lowest in seven months in July, while broad credit growth dropped to a record low. We expect further …
Consumer price inflation slipped into negative territory in July. But this probably won’t last more than a quarter or two and has less to do with the health of domestic demand than many think. Inflation in services, the part of the CPI basket most …
This page has been updated with additional analysis since first publication . Services inflation hits 17-month high CPI joined PPI in deflationary territory last month. But this was due to a sharp drop in food inflation caused by base effects. More …
9th August 2023
This page has been updated with additional analysis since first publication . Exports have further to fall Chinese exports contracted in July by the most since the start of the pandemic. But the recent declines mostly reflect lower prices rather than …
8th August 2023
Speeding up bond issuance is a start but not enough Following last week’s dovish Politburo meeting readout, regulators have reportedly told local officials that they have until the end of next month to fully utilize their annual issuance quotas for …
4th August 2023
The property downturn has left state-owned developers the dominant players in a previously privately-led sector. The state is likely to continue playing a larger role as consolidation continues around more financially-secure firms. Based on a sample of …
3rd August 2023
We estimate that China’s trend rate of growth has slowed from 5.0% in 2019 to 3.0% now, based on our China Activity Proxy. This is a steeper deceleration than in the years leading up to the emergence of COVID-19. The official GDP data, while not fully …
2nd August 2023
China's reopening recovery has fizzled out and the economy is now at risk of slipping into a recession. We think policymakers will provide enough stimulus to avoid this and deliver a modest reacceleration in growth over the coming quarters. But most of …
31st July 2023
This page has been updated with additional analysis and charts since first publication. Economic recovery takes a step backwards Hong Kong’s GDP contracted in q/q terms in Q2, underperforming most expectations. A sharp fall in government spending and …
This page was first published on Monday 31st July, covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Tuesday 1st August, and the Caixin services and composite PMI on Thursday 3rd August. Construction downturn deepens The …
China’s leadership promises more support The highlight of the week was Monday’s Politburo meeting. Although light on specifics, the readout was dovish in tone and made clear that more policy easing is on its way. While substantial direct support for …
28th July 2023
Our China Activity Proxy (CAP) suggests that China’s economy contracted in June as the service sector spluttered. Policy support means the economy should return to growth before long. But the pace of future expansion will be more modest than in the past. …
27th July 2023
China is not suffering a balance sheet recession: most private firms are not highly indebted and would borrow if they had more confidence in the economic outlook. But there are other parallels with Japan’s circumstances in the 1990s that point to …
24th July 2023
More support signalled but follow-through remains in question The readout of the Politburo’s quarterly meeting on economic affairs has just been published by state media. It struck a dovish tone but fell short of delivering any major new announcements. …
Regulatory environment is only part of the problem After making life more difficult for many private firms in recent years, officials are shifting course. On Wednesday, a document aimed at promoting the development of the private sector was jointly issued …
21st July 2023
This page has been updated with additional analysis and charts since first publication. Recovery shifts down a gear GDP slowed more than expected in Q2 due to a fizzling out of the reopening boost. Continued weakness in the property sector, possible …
17th July 2023
Recent measures have been sector-specific Policymakers have been taking further steps to support the economy this week. But efforts are being directed at struggling sectors rather than the wider economy through broad stimulus measures. The PBOC and …
14th July 2023
This page has been updated with additional analysis since first publication . Exports to shrink further before bottoming out Chinese exports contracted year-on-year in June by the most since March 2020, with export volumes falling to a 6-month low. And …
13th July 2023
This page has been updated with additional analysis since first publication . Stronger than expected but still relatively weak Although stronger than most had expected, bank loan growth still fell to its lowest in five months in June, while broad credit …
11th July 2023
This page has been updated with additional analysis since first publication . Price pressures set to remain subdued this year Producer price deflation deepened further last month to its lowest in more than seven years, and consumer price inflation dropped …
10th July 2023
China has stepped up its support of the renminbi and Japan appears to be edging closer to direct intervention to prop up the yen. While pressure from higher US interest rates may well continue in the short term, we think that both currencies will rebound …
7th July 2023
Stronger RMB by year-end The PBOC’s Q2 Monetary Policy Report, published last Friday, included new language pledging to “prevent large fluctuations in the exchange rate”. Then, with the renminbi approaching 7.3/$ at the start of this week, the PBOC pushed …
PBOC surveys offer clues on propensity to spend… Yesterday, the People’s Bank (PBOC) published the latest results of its quarterly surveys, in which it polls 3,200 banks, 5,000 industrial enterprises and 20,000 households across 50 cities. These offer a …
30th June 2023
China’s reopening recovery is struggling for momentum and quarter-on-quarter growth will be subdued for the rest of the year. But with policymakers likely to step up support soon, the economy should still make some headway. … China Chart Pack (Jun. …
This page was first published on Friday 30th June, covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Monday 3rd July, and Caixin services and composite PMI on Wednesday 5th July. Growth now below pre-pandemic levels This …
Overview – China’s reopening recovery is struggling for momentum and quarter-on-quarter growth will be subdued for the rest of the year. But with policymakers likely to step up support soon, the economy should still make some headway. Consumer Spending – …
28th June 2023
Our China Activity Proxy (CAP) suggests that China’s economy stagnated in May as the tailwind from reopening fizzled out. We think officials will roll out sufficient policy support to keep the recovery alive but not enough to prevent subdued …
26th June 2023
Support measures could take time to draw up Hopes for more policy easing intensified last week after the surprise cut to the PBOC’s reverse repo rate and the release of weak activity data for May. Late last Friday, the State Council said that it was …
23rd June 2023
Monetary easing alone won’t suffice Data published this week made it clear that the reopening recovery has stalled. Momentum weakened almost across the board in May, and the labour market began to soften again. Broad credit growth also slowed sharply . …
16th June 2023
This page has been updated with additional analysis and charts since first publication. We discussed the state of China’s post-zero-COVID recovery, what we're expecting in response from policymakers, and the implications for markets, in an online briefing …
15th June 2023
This page has been updated with additional analysis and charts since first publication. A worrying deceleration Broad credit growth slowed sharply in May and has now reversed almost all its reopening recovery. This poses a downside risk to growth and …
13th June 2023
This report was first published in response to the PBOC’s cut to its 7-day reverse repo rate. It has since been updated to reflect subsequent developments. 13th June: Additional analysis and charts added. 15th June: Coverage of MLF cut added. 20th June: …
Note: We’ll be discussing whether China’s post-zero-COVID recovery is already over in an online briefing at 09:00 BST/16:00 SGT on 15th June . Register now . Property support of limited use in isolation Stocks of Chinese property developers surged …
9th June 2023
This page has been updated with additional analysis and charts since first publication. Inflation remains low as initial reopening effects begin to fade Producer price deflation deepened further last month to a 87-month low. Consumer price inflation …
The market optimism which greeted the end of zero-COVID restrictions has quickly given way to gloom after a string of disappointing data releases. Markets are down and speculation is rife that the government will do more to ease policy to give the economy …
7th June 2023
This page has been updated with additional analysis and charts since first publication. Exports stumbled but imports jumped China’s exports contracted year-on-year in May for the first time in three months, with export volumes falling below their …
Second-round effects from reopening still in play Investors have become increasingly bearish on the outlook for household spending in China. Onshore-listed consumer discretionary stocks have now reversed almost all of their reopening gains and those …
1st June 2023
This page has been updated with additional analysis and charts since first publication. Recovery still making headway The PMI surveys suggest that China’s economic recovery was still ongoing in May. Waning fiscal support weighed on construction activity. …
31st May 2023
The renminbi strengthened sharply against the US dollar in response to China’s move away from zero-COVID. But the currency has since reversed much of those gains and is now approaching 7.10/$, its weakest level since December. Optimism over China’s …
30th May 2023
Our China Activity Proxy (CAP) shows that, despite losing some momentum, the economic recovery was still making progress at the start of Q2. And we think there is still scope for further improvement, especially in the service sector. The CAP is our …
29th May 2023
Slow progress tackling construction backlog New home sales have ticked up since the end of last year, helped by a post-zero-COVID recovery in consumer confidence and large reductions in mortgage rates and down-payment requirements. But the improvement has …
26th May 2023
Challenges to China’s long-run growth potential that were mounting a few years ago are now evident to all. We continue to expect trend growth to have fallen to around 2% in 2030. We held an online drop-in yesterday to discuss how our views on China’s …
Chinese government bonds have rallied over the past couple of months, with the 2-year yield falling over 20bps since mid-March. This reflects mounting expectations for monetary easing in response to what has widely been viewed as an underwhelming …
19th May 2023
Over the past couple of weeks we have held a series of roundtable discussions with clients across Asia and North America on the outlook for EMs. In this Update we provide our thoughts on the recurring questions that we received, including on China’s …
This page has been updated with additional analysis and charts since the initial publication. A mixed start to Q2 Growth on most indicators accelerated in y/y terms in April. But this was due to a weak base for comparison from a year ago when Shanghai and …
16th May 2023
An underwhelming set of data published over the past week have added to growing concerns about the state of China’s recovery. Imports , inflation and credit all came in below expectations for April. It might seem hard to square this with the more …
12th May 2023
