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China

A return to the streets, stimulus still being drip-fed

Consumers have returned to the streets, with daily data showing that mobility is now largely back to normal. But it will be a while before they fully reopen their wallets. A lack of substantial policy support is preventing a faster recovery. Officials continue to talk about doing more but the only concrete measures announced this week involved small-scale support for the auto industry.  

24 June 2022

China Activity Monitor

CAP: Output to stagnate in 2022 despite latest bounce

Our China Activity Proxy suggests that around half of the drop in output during the recent virus wave reversed in May. This recovery looks to have continued in June. But a lot of damage has already been done and we now doubt that China’s economy will grow at all this year. Asia Drop-In (30th June, 09:00 BST/16:00 SGT): Are Asia’s central banks behind the curve? Can the Bank of Japan and People’s Bank of China continue to go against the grain? Find out in our special session on what global monetary tightening looks like in Asia. Register now.  

22 June 2022

China Economics Weekly

GDP target unattainable, shipping disruption

China’s statistics office is adept at massaging GDP data. But with many of the indicators that feed into GDP showing year-on-year contractions in April and May, even it won’t be able to deliver published growth at the rate the government wants this year. Meanwhile, the latest port throughput data suggest that Shanghai’s lockdown had a much smaller impact on shipping than commonly supposed.

17 June 2022

Key Forecasts

Main Economic & Market Forecasts

%q/q annualised (%y/y), unless stated

Latest

Q2 2022

Q3 2022

Q4 2022

Q1 2023

2021

2022f

2023f

2024f

Official GDP

+1.3(+4.8)*

(+0.5)

(+4.2)

(+6.3)

(+5.7)

(+8.1)

(+4.0)

(+6.0)

(+4.0)

GDP (CE CAP-derived estimates)

+0.4(-1.9)*

(-5.5)

(+1.3)

(+3.3)

(+3.9)

(+9.0)

(-0.5)

(+5.5)

(+4.0)

Consumer Prices

(+2.1)**

(+2.0)

(+2.3)

(+1.4)

(+1.8)

(+0.9)

(+1.7)

(+0.9)

(+1.1)

Producer Prices

(+6.4)**

(+6.0)

(+3.8)

(+0.7)

(+0.7)

(+8.1)

(+4.8)

(-0.3)

(-0.2)

Broad Credit (AFRE)

(+10.5)**

(+11.0)

(+11.2)

(+11.1)

(+10.8)

(+10.3)

(+11.1)

(+9.6)

(+8.6)

Exports (US$)

(+16.9)**

(+8.0)

(+1.0)

(-4.0)

(-8.5)

(+29.9)

(+4.5)

(-9.5)

(-4.0)

Imports (US$)

(+4.1)**

(+2.0)

(-2.5)

(-7.0)

(+8.5)

(+30.1)

(+0.5)

(-4.0)

(-4.0)

RMB/$

6.70

6.70

6.90

7.00

7.00

6.37

7.00

7.00

7.00

7-day PBOC reverse repo %

2.10

2.10

2.10

2.10

2.10

2.20

2.10

2.10

2.10

1-year Loan Prime Rate (LPR) %

3.70

3.70

3.70

3.70

3.70

3.80

3.70

3.70

3.70

1-year MLF Rate %

2.85

2.85

2.85

2.85

2.85

2.95

2.85

2.85

2.85

10-year Government Bond Yield %

2.81

2.70

2.60

2.60

2.50

2.78

2.60

2.50

2.50

RRR (major banks) %

11.25

11.25

11.0

11.0

11.0

11.5

11.0

11.0

11.0

CSI 300 Index

4,245

4,250

4,275

4,300

4,338

4,940

4,300

4,450

4,600

Hong Kong GDP

(-4.0)*

(-0.7)

(+2.1)

(+4.3)

(+9.1)

(+6.3)

(+0.5)

(+7.5)

(+3.0)

Hang Seng Index

20,954

20,800

19,400

18,000

18,400

23,398

18,000

19,200

20,400

Sources: Bloomberg, CEIC, Capital Economics *Q1; **May; End of period


GDP target unattainable, shipping disruption

China Economics Weekly

26 June 2022

Our view

China’s recovery from the Omicron wave will be far weaker than that in 2020. Outbreak, lockdowns and quarantine remain lingering threats that will make consumers and businesses cautious. The export boom that lifted China’s economy rapidly from its initial lockdown two years ago is going into reverse. Property construction will remain depressed. Meanwhile, for all the talk of policy support in recent weeks, it is striking how little is being delivered. While many have lowered forecasts recently, we continue to believe that the consensus is too optimistic. Our forecast for actual growth in China (as opposed to whatever the official figures say) is 2%. And with Omicron still circulating and zero-COVID the goal, risks are skewed to the downside.

Latest Outlook

China Economic Outlook

No quick fix this time

China’s economy rebounded sharply from the initial COVID-19 outbreak. The recovery will be slower and more muted this time, even if the ongoing COVID outbreak is successfully quashed, as less policy support is planned and exporters face a reversal in fortunes.

26 April 2022