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Some very modest reopening effects Consumer price inflation ticked up in December, while producer price deflation eased. There are some early signs that the transition toward living with COVID is starting to put upward pressure on prices. But the uptick …
12th January 2023
Getting worse in December but soon likely to be getting better The downturn in credit growth extended in December amid the economic disruption from reopening. But the worst of the disruption may have already passed. The shift toward living with COVID and …
10th January 2023
Getting worse in December but soon likely to be getting better The downturn in credit growth extended in December amid the economic disruption from reopening. But the worst of disruption may have already passed. The shift toward living with COVID and …
The shift toward living with COVID will put some upward pressure on prices in China. But the uptick in inflation will not be as large as that seen in many other countries as they emerged from COVID controls over the past couple of years. While the initial …
9th January 2023
COVID-19 has torn through China’s population with remarkable speed. Medical experts estimate that over 70% of the population in major cities such as Shanghai have been infected since mid-November. Anecdotal evidence suggests that the human cost among the …
6th January 2023
Downward pressure on the Hong Kong dollar has abated in recent weeks and we think it is very unlikely that the existing currency framework will be abandoned any time soon. For much of 2022, the USD/HKD rate traded at the upper end of the band defined by …
It is three years since a cluster of cases of severe pneumonia started to draw attention in Wuhan. Chart 1 maps economic developments in China since then. The blue bars show cumulative growth since the end of 2019 and the black outlines show growth over …
4th January 2023
Headwinds from reopening continue into 2023 The latest surveys suggest that the reopening wave delivered another blow to the economy in December. Services activity looks to have slumped. Industry was not spared, although the hit appears more modest. But a …
3rd January 2023
Headwinds from reopening continue into 2023 The latest manufacturing surveys suggest that the hit to factory activity intensified further in December following the surge in infections. A combination of recurrent virus waves, a deepening global downturn …
The next couple of weeks will be crucial in China’s battle with COVID. It is possible, given reports of how widespread infections currently are, that the outbreak in Beijing is close to a peak (the official infection data are no longer reliable, so we …
23rd December 2022
Our China Activity Proxy (CAP) reveals the extent of the economic damage being done by the zero-COVID policy in its final weeks. Hopes that its ending would lead to a rapid recovery have been dashed though, as the rapid spread of infections has caused …
22nd December 2022
CEWC points to further policy support The Central Economic Work Conference (CEWC) ended today with a readout in state media promising further policy support for consumers and property developers in particular. China will “expand domestic demand” and …
16th December 2022
China’s authorities appear to have given up trying to manage the spread of COVID-19. If we’re right, the surge in infections underway in Beijing will spread rapidly across the country. As is happening now in the capital, many people will stay at home if …
15th December 2022
This is part of a series of reports outlining our key macro and market calls for 2023. Click here to view the full series. Our latest EM Outlook can be found here . EMs will experience one of the broadest slowdowns in GDP growth in 2023 since the 1990s. …
The downturn has deepened and reopening won’t reverse it overnight The disruption from virus outbreaks intensified in November, with retail sales, investment spending and industrial output all contracting by the most month-on-month since the Shanghai …
Little appetite for borrowing Credit growth has now reversed all of its modest acceleration over the past year, a clear sign that monetary easing has failed to gain traction due to virus disruption and waning confidence among households and firms. …
12th December 2022
Fiscal policy coming back to life Fiscal policy has not played much of a role supporting the economy this year. A large part of the blame lies in an inflexible budget process that makes it hard for the finance ministry to depart from limits set in …
9th December 2022
Overview – The authorities are making policy changes to address two of the key drags on China’s economy, the zero-COVID policy and the property sector downturn. But it will be a while before these efforts bear fruit. And in the meantime, the economy will …
Inflation likely to remain subdued even amid reopening Consumer price inflation dropped to its lowest in eight months in November and producer price inflation stayed at a 23-month low. The shift away from zero-COVID could put some upward pressure on …
Exports to shrink further as global recession looms Chinese exports contracted year-on-year in November by the most since the start of the pandemic and imports dropped at the fastest pace in 30 months. We expect outbound shipments to fall further over the …
7th December 2022
Exports set to shrink further as global recession looms Chinese exports contracted year-on-year in November by the most since the start of the pandemic and imports dropped at the fastest pace in 30 months. We expect outbound shipments to fall further over …
Economy set for Q4 contraction due to virus hit The November PMI readings published this week underscored the economic cost of efforts to contain the current outbreak. The official services index fell to its lowest level since the height of the Omicron …
2nd December 2022
More signs of weakness in industry The Caixin manufacturing PMI edged up in November but remained weak. Taken together with the official survey published yesterday, they suggest that downward pressure on industrial activity intensified last month. The …
1st December 2022
More signs of weakness in industry The Caixin manufacturing PMI edged up in November but remained weak. Taken together with the official survey published yesterday, the surveys suggest that downward pressure on industrial activity intensified last month. …
COVID disruptions deliver a further hit to activity The official PMIs add further evidence of another large blow to services activity as virus disruptions intensified this month. The hit to industry looks to have been more modest. But downside risks …
30th November 2022
Concrete signs of an effort to exit from zero-COVID are emerging, with a notice today of a push to vaccinate the elderly. The low level of vaccine coverage of the most vulnerable is, along with a lack of healthcare capacity, the major constraint on …
29th November 2022
The authorities will not allow a protest movement to occupy China’s streets for any length of time. If the protests continue, a crackdown is very likely. They have no good options in the near-term to address protestors’ demands: relaxation of strict COVID …
28th November 2022
Warmer words in US-China relations There has been a palpable easing of strains between China and the West since the cordial meeting last week between Xi and Biden . Xi agreed to restart the high-level talks that China halted when Nancy Pelosi visited …
25th November 2022
As China's new infection numbers hit a record, its zero-COVID policy is coming under severe strain. Despite hopes that the government would be moving away from the controversial policy, more and more cities across China are being locked down as …
The reduction in the required reserve ratio (RRR) that the PBOC just announced will help banks follow through on a directive to defer loan repayments from firms struggling with widening lockdown restrictions. Market interest rates may also edge down as a …
Our China Activity Proxy (CAP) suggests that virus disruption led to a further decline in output in October. The combination of tightening COVID restrictions, voluntary isolation in the face of rising cases, problems in the property sector and falling …
23rd November 2022
The next few weeks could be the worst in China since the early weeks of the pandemic both for the economy and the healthcare system . Efforts to contain the current outbreak will, at the very least, require additional localised lockdowns in many cities, …
22nd November 2022
Virus disruption has continued to intensify over the past week even after measures to optimise the COVID response were released. Implementation has been haphazard so far. Local officials have struggled to strike a balance between minimising disruption and …
18th November 2022
Recent policy announcements have raised hopes that the property downturn may be coming to an end. But while the measures made public so far reduce some of the downside risks by giving developers and their creditors a little breathing room, they fall short …
17th November 2022
Economy to continue struggling The October data point to a further loss of momentum, with retail sales dropping sharply amid worsening virus outbreaks. November is shaping up to be even worse. With exports cooling, the property sector still in the …
15th November 2022
Virus disruption has intensified recently, with COVID infections hitting a six-month high. The Politburo Standing Committee (PBSC, China’s highest leadership body), met yesterday to discuss the situation. According to the meeting readout, they agreed to …
11th November 2022
A shift away from zero-COVID would be positive for China’s economy over the medium term. But the immediate disruption of reopening would probably exceed the cost of keeping the policy in place, especially if vaccine coverage among the elderly hadn’t …
10th November 2022
Households stop borrowing outright as leadership recommits to zero-COVID Much weaker than expected credit growth – and an extremely unusual outright fall in lending to households – again underlines the difficulties policymakers are facing stimulating …
Factory-gate deflation setting in Consumer price inflation eased last month from September’s 29-month high and remained below the government’s preferred ceiling of 3%. It is set to stay low by global standards over the coming quarters. Meanwhile, producer …
9th November 2022
PPI deflation setting in Consumer price inflation eased last month from September’s 29-month high and remained below the government’s preferred ceiling of 3%. It is set to stay low by global standards over the coming quarters. Meanwhile, producer price …
Exports set to fall further as outlook darkens China’s export volumes dropped back sharply in October, due to a deterioration in global economic conditions and a reversal in pandemic-related demand. We expect exports to weaken further over the coming …
7th November 2022
Chinese equities turned a corner earlier in the week on the back of rumours of plans to shift away from the zero-COVID policy by next March. Remarks reportedly made at a conference by Zeng Guang, the former chief scientist at China’s CDC, added fuel to …
4th November 2022
On some measures China’s current COVID situation is about as bad as it has ever been. While far fewer infections are being found daily than at the peak of the Omicron wave, new cases are geographically spread just as wide, with the result that the …
1st November 2022
