Delta blow to give way to property downturn

Our China Activity Proxy (CAP) suggests that economic output dropped back sharply in August. The big hit to services activity from efforts to contain the Delta variant should mostly reverse this month. But the downturn in the property sector has further to run.
Julian Evans-Pritchard Senior China Economist
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China Economics Weekly

Capacity constraints put a ceiling on export outlook

In the long-run, the global spread of highly-transmissible coronavirus strains may make China’s zero-COVID stance untenable but the immediate response to concerns about B.1.1.529  is more likely to be a doubling down on the strategy, with rolling local lockdowns in response to any local cases and continued tight border controls. China’s exporters could benefit from another wave of lockdown-induced demand elsewhere in the world. But capacity limits, particularly at ports, potentially exacerbated by further port shutdowns, may limit their ability to meet orders.

26 November 2021

China Activity Monitor

Service sector recovery remains lacklustre

Our China Activity Proxy (CAP) shows that growth ticked up last month as energy shortages eased and the service sector continued to recover from virus disruptions over the summer. But the rebound remains lacklustre, with output still well below June’s peak. And while the outlook for home sales and exports has brightened in recent weeks, cooling construction activity still looks set to weigh on growth next year.

24 November 2021

China Economics Update

LPR on hold but wider easing already underway

The Loan Prime Rate (LPR) remained unchanged for the 19th consecutive month today. But officials are already easing policy in other ways, such as by relaxing constraints on mortgage lending. The PBOC has also pushed down bank funding costs via recent deposit rate reforms and July’s RRR cut, paving the way for future moves to nudge down lending rates using LPR cuts.

22 November 2021

More from Julian Evans-Pritchard

China Economics Weekly

Local governments prepare to step in

Evergrande creditors face a bumpy few weeks with a string of bond coupon payments due. Even if the company can scrape together the cash – not at all certain, given that it just missed one payment deadline – its chances of repaying the principal on bonds maturing early next year are low. Officials are initially pushing creditors to find a solution that allows work on ongoing projects to resume. But if that fails, the company will most likely be broken apart at the hands of local governments.

24 September 2021

China Economics Update

Most developers are not on the brink of default

With a couple of exceptions, most major developers are in a much stronger financial position than Evergrande and should be able to weather a temporary spike in their borrowing costs amid contagion fears. Successfully navigating the structural decline in housing demand over the coming decade will prove more challenging. A drawn-out consolidation of the sector over many years seems more likely than an imminent wave of developer failures.

Drop-In: Evergrande – What are the risks to China and the world? Chief Asia Economist Mark Williams and Senior China Economist Julian Evans-Pritchard will be joined by Senior Markets Economist Oliver Jones to take your questions about the Evergrande situation. They’ll be covering the implications of collapse for China’s financial system and growth outlook, and assessing the global markets fallout. Register here for the 0900 BST/1600 HKT session on Thursday, 23rd September.

22 September 2021

China Economics Update

LPR cuts appear imminent

Commercial banks left the Loan Prime Rate (LPR) on hold for a 17th consecutive month today. But with the economy losing steam and concerns around the property sector growing, we think policy rate cuts by the PBOC could come as soon as next month.

22 September 2021
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