China

China Data Response

China PMIs (Jul.)

The latest surveys suggest that the pace of growth slowed more than expected last month. Supply bottlenecks remain a constraint. But the PMIs suggest demand is cooling too, taking the heat out of price gains and weighing on activity in industry and construction. China slowdown webinar: Join us on Thursday, 5th August for a special webinar assessing the impact of China’s economic slowdown on the global recovery. Neil Shearing will lead a discussion with economists from across our economics and markets services to assess whether investors should brace for fresh volatility with China poised for a structural deceleration. Register here for sessions at 0900 BST/1600 HKT or 1100 ET/1600 BST.

2 August 2021

China Economics Weekly

Delta putting zero-COVID approach under strain

China’s ability to quash COVID flare-ups is being tested again:  the Delta variant outbreak that was identified in Nanjing last week has already spread further within China than any since the first that emerged from Wuhan. But the bigger challenge it poses is to China’s long-term strategy of keeping COVID infections as close to zero as possible.

30 July 2021

China Data Response

Hong Kong GDP (Q2 Preliminary)

Hong Kong’s economy contracted last quarter as exports moderated after an exceptional Q1. The path of output is likely to remain subdued until Hong Kong’s borders reopen.

30 July 2021

Key Forecasts

Main Economic & Market Forecasts

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

Latest

Q3 2021

Q4 2021

Q1 2022

Q2 2022

2020

2021f

2022f

2023f

Official GDP

(+7.9)*

(+5.2)

(+3.5)

(+5.2)

(+5.3)

(+2.3)

(+8.0)

(+5.7)

(+5.5)

GDP (CE CAP-derived estimates)

(+14.1)*

(+4.7)

(+1.3)

(+1.7)

(+1.1)

(+1.2)

(+10.0)

(+3.0)

(+4.0)

Consumer Prices

(+1.3)**

(+1.6)

(+1.4)

(+1.4)

(+1.0)

(+2.5)

(+1.0)

(+1.5)

(+1.5)

Producer Prices

(+9.0)**

(+7.1)

(+5.5)

(+2.0)

(-1.8)

(-1.8)

(+5.2)

(-0.5)

(-1.0)

Broad Credit (AFRE)

(+11.0)**

(+10.8)

(+10.5)

(+9.0)

(+8.4)

(+13.3)

(+10.5)

(+8.6)

(+8.4)

Exports (US$)

(+32.2)**

(+19.0)

(+6.0)

(-4.0)

(-9.5)

(+3.6)

(+23.5)

(-6.0)

(+0.5)

Imports (US$)

(+36.7)**

(+17.5)

(+9.5)

(+15.0)

(-3.5)

(-1.1)

(+23.5)

(-2.0)

(-2.0)

RMB/$

6.46

6.60

6.70

6.75

6.80

6.54

6.70

6.90

6.70

7-day PBOC reverse repo %

2.20

2.20

2.10

2.00

1.90

2.20

2.10

1.90

1.90

1-year Loan Prime Rate (LPR) %

3.85

3.85

3.85

3.85

3.85

3.85

3.85

3.85

3.85

1-year MLF Rate %

2.95

2.95

2.95

2.95

2.95

2.95

2.95

2.95

2.95

10-year Government Bond Yield %

2.88

3.00

2.90

2.80

2.70

3.20

2.90

2.60

2.50

RRR (major banks) %

12.0

12.0

11.5

11.0

10.5

12.5

11.5

10.5

10.5

CSI 300 Index

4,764

4,775

4,800

4,813

4,825

5,211

4,800

4,850

4,900

Hong Kong GDP

(+7.5)*

(+7.4)

(+9.6)

(+3.0)

(+5.8)

(-6.1)

(+8.0)

(+5.0)

(+4.0)

Hang Seng Index

25,965

25,625

25,250

25,375

25,500

27,231

25,250

25,750

25,750

Sources: Bloomberg, CEIC, Capital Economics *Q2; **Jun.; End of period


Delta putting zero-COVID approach under strain

China Economics Weekly

3 August 2021

Our view

China’s economy has so far weathered a withdrawal in policy support very well. But the pandemic-induced surge in global demand for Chinese goods can only offset the sharp slowdown in domestic credit growth for so long. We think there’s a good chance that a deceleration over coming quarters catches investors out, just as the speed of China’s acceleration did in the second half of last year. Further ahead, the Five-Year Plan outlines ambitious proposals to reshape China as a driver of innovation. We believe though that the Plan’s increased focus on self-sufficiency will instead cause productivity to slow. And China’s once-a-decade census suggests the country is facing even more severe demographic headwinds than previously understood.

Latest Outlook

China Economic Outlook

Coming down to earth

China’s economy has been defying gravity thanks to elevated global demand but this support may now be fading. Meanwhile, last year’s policy easing has been fully reversed. An abrupt slowdown is not likely to follow, but highly-indebted firms, including many property developers, will come under increasing strain.

23 July 2021