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Better than expected but still consistent with a slowdown The Caixin manufacturing PMI rose in October but remained weak. Taken together with the official survey published yesterday, it points to a slowdown in industrial activity last month. We think the …
1st November 2022
Weak exports will continue to hold back the city’s recovery Hong Kong’s economy contracted last quarter due to a sharp decline in exports. While the ongoing easing of virus-related restrictions should continue to support a recovery in retail spending, …
31st October 2022
COVID disruptions and global downturn hit activity The official PMIs point to a further loss of momentum this month as virus disruptions worsened and export orders remained under pressure. With the zero-COVID policy here to stay, we think the economy will …
COVID disruptions and global downturn hit activity The official PMIs point to a further loss of momentum in this month as virus disruptions worsened and export orders remained under pressure. With the zero-COVID policy here to stay, we think the economy …
The Q3 GDP figures published earlier this week came in slightly stronger than expected. We don’t think the data should be taken completely at face value – our in-house alternative, the China Activity Proxy, paints a more downbeat picture . But the …
28th October 2022
Our China Activity Proxy (CAP) suggests that output declined in September by the most since the Omicron wave. The main culprit – renewed disruption from virus curbs – appears to have worsened further this month. We think the economy will contract this …
25th October 2022
Xi Jinping has removed the last vestiges of rival factions from the upper echelons of the Party, stacking the Politburo full of loyalists in a clean sweep not seen since the Mao era. With political ties taking increasing precedence over technocratic …
24th October 2022
Omicron hit reversed but momentum still weak Growth ticked up in Q3 as China's economy recovered from the Omicron wave. But this leaves output only slightly higher than where it started the year. And momentum is already weakening again. GDP growth picked …
Omicron hit reversed but momentum still weak Growth ticked up in Q3 as the hit from the Omicron wave reversed. But this leaves output only slightly higher than where it started the year. And momentum is now weakening again. GDP growth picked up from 0.4% …
The Party Congress has slowed the leadership’s response to the semiconductor export controls introduced by the Biden administration two weeks ago. But the Ministry of Industry and Information Technology has, according to Bloomberg, been conducting …
21st October 2022
Overview - We expect greater stimulus next year. But with the zero-COVID policy here to stay, an abrupt turnaround in property construction unlikely and exports set to fall, policymakers face an uphill battle. Growth will remain depressed. Consumer …
Economists from across our Asia teams were online for this 20-minute briefing on the region’s big investment stories. During this session, the team answered client questions about what’s happening in Asian economics and markets as they addressed current …
20th October 2022
General Secretary Xi’s Report to the Party Congress signalled a further shift away from market-based reforms in favour of a state-led campaign to increase self-sufficiency and economic security. Investors should also be wary of the growing focus on …
17th October 2022
The Party Congress begins on Sunday. We covered much of the agenda and economic implications in a Focus piece and at a Drop-In event (recording here ) this week. One element of both was a discussion of who might replace Li Keqiang as premier. But Li …
14th October 2022
Core inflation continues to ease Consumer price inflation rose to a 29-month high in September and is now scraping up against the government’s preferred ceiling of 3%. But this was due to a rise in food inflation that is likely to prove temporary. With …
There is no prospect of China lifting its zero-COVID policy in the near future and it probably won’t happen before the end of 2023. If the leadership did want to transition to living with the virus, it would first have to raise the vaccination rate of …
13th October 2022
Policy support starts to gain traction Credit growth surprised to the upside last month, edging up thanks to official efforts to boost lending via policy banks. But wider appetite for borrowing still appears depressed, which will probably keep credit …
12th October 2022
Central banks have the tools to deal with liquidity crises arising from rising interest rates and falling asset prices. Instead, the bigger threat is that higher interest rates produce large and simultaneous falls in asset prices that threaten the …
11th October 2022
Our economists discussed what to expect from the Party Congress and answered client questions in an online Drop-In. The recording can be viewed here . The Party Congress will deliver a major reshuffle of China’s leadership but, with General Secretary …
Our annual Spotlight series this year looks at the implications of the “fracturing” of the global economy that we believe is being caused by the re-emergence of geopolitics as a driver of policy. The key divide is between China and the West. Events at the …
7th October 2022
No sign of FX sales, but PBOC pushing back in other ways The decline in China’s foreign exchange reserves appears to be due to valuation effects rather than direct intervention in the FX market. But we still think the PBOC will try, and may well succeed, …
It has been five years since the People’s Bank last dipped into its own foreign exchange reserves on a significant scale to support the currency. Since then, it is widely believed …
3rd October 2022
Mortgage rate floor relaxed, LPR cuts now less likely After being slashed this year, mortgage rates in most cities are now at the regulatory floor which, for first-time buyers, is currently set at 20 basis points below the five-year loan prime rate …
30th September 2022
Industry and services both take a hit The surveys suggest that China’s economy continued to lose momentum in September, with the global downturn weighing on exports and virus disruptions dealing a fresh blow to services activity. While the latter should …
Our China Activity Proxy (CAP) suggests that virus disruption and cooling exports caused the economy to stagnate in August. September was likely worse and there is little upside in the near-term. The CAP is our attempt to track the pace of growth in …
28th September 2022
Some progress in restarting stalled projects Back in July, homeowners banded together en masse and refused to repay mortgages on presold homes in projects where construction had stalled. This sent shockwaves through the housing market, further …
23rd September 2022
The outlook for China’s economy has deteriorated recently, but it still doesn’t look like the PBOC will ease policy much in response. We suspect that if the central bank were to have a change of heart, it would be quite disruptive to the country’s …
16th September 2022
PBOC trying to loosen without triggering renminbi The onshore renminbi weakened past 7/$ for the first time in two years today. Recent currency weakness has clearly put the PBOC on edge. It has been pushing back via the daily fixing. The exchange rate …
Economy to stay weak amid zero-COVID and property woes China’s economy held up slightly better than anticipated last month, but momentum still weakened relative to July amid renewed virus disruptions and factory closures due to power shortages. September …
Economy set to remain weak due to zero-COVID and property woes China’s economy held up slightly better than anticipated last month, but momentum still weakened relative to July amid renewed virus disruptions and factory closures due to power shortages. …
Frozen in the headlights Early indicators suggest that China’s economy was even weaker in August than it was in July, when the rebound from the Shanghai lockdown prematurely fizzled out. And constraints faced by policymakers – some they have little …
9th September 2022
Credit growth depressed and likely to remain so There was a further deceleration in credit growth last month, with a new wave of lockdowns adding to the problems in the housing market that have been hitting credit demand. Credit growth will continue to …
Inflation set to remain below government’s ceiling this year Consumer price inflation fell in August and remains below the PBOC’s preferred ceiling of 3%, leaving room for the Bank to ease policy further. Meanwhile, producer price inflation declined to …
Inflation will remain below government’s ceiling this year Consumer price inflation fell in August and remains below the PBOC’s preferred ceiling of 3%, leaving room for the Bank to ease policy further. Meanwhile, producer price inflation declined to its …
More suggestions of PBOC intervention A sizeable fall in the value of China’s foreign exchange reserves in August may be further evidence of the PBOC pushing back against the slide in the renminbi. If the currency were to breach 7 to the dollar, this …
7th September 2022
Exports weaker than expected China’s export volumes fell last month by the most since March. Partly, this was due to the backlog of orders that built up during Shanghai’s lockdown having been cleared and ports returning to normal operations. But there was …
Exports drop back amid cooling global demand Export volumes fell by the most since March in a sign that slowing global growth and the normalisation of consumption patterns is starting to weigh on demand for Chinese goods. In contrast, there was a slight …
COVID-19 rears its head again Virus cases have fallen back over the past few weeks as the large outbreak on Hainan island has come under control. But that masks a rapidly deteriorating situation nationwide, with 44 cities now undergoing outbreaks, …
2nd September 2022
More signs that growth has stalled The larger-than-expected drop in Caixin manufacturing PMI was more significant than the slight rise in the official PMI, suggesting that downward pressure on industry intensified last month . There is more pain on the …
1st September 2022
More signs that growth has stalled The larger-than-expected drop in Caixin manufacturing PMI was more significant than the slight rise in the official PMI , suggesting that downward pressure on industry intensified last month. There is more pain on the …
The renminbi has weakened 2.5% against the US dollar since mid-August and is nearing our year-end forecast of 7.00/$. This is mostly a reflection of broad dollar strength – the …
31st August 2022
Recovery continues to lose steam The official PMIs show a further loss in economic momentum this month as the reopening boost waned and the property downturn deepened. We continue to think the economy will struggle to make much headway during the coming …
Lots of talk, not much action There has been a raft of policy announcements during the past week. Last Friday, officials unveiled a scheme to channel financing to developers. On Monday, the Loan Prime Rates were lowered. And on Wednesday, the State …
26th August 2022
We expect the PBOC to follow its recent policy rate cuts with further easing over the months ahead. This informs our decision to lower our forecasts for China’s 10-year government bond yield. But we don’t think further rate cuts, of the scale we …
24th August 2022
Our China Activity Proxy (CAP) suggests that the economic rebound following the hit from lockdowns had petered out in July. And despite increased policy support, growing headwinds will continue to weigh on the economy during the remainder of the …
22nd August 2022
