Delta speed bump not the only drag

Our China Activity Proxy (CAP) suggests that output dropped back further in July. This shouldn’t be dismissed as a temporary setback due to the recent virus outbreak. The main drag last month came from industry and construction, where the key headwinds are tight credit conditions and supply bottlenecks.
Julian Evans-Pritchard Senior China Economist
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China Economic Outlook

Cyclical trough, tepid rebound

China will be buffeted in the first half of 2022 by COVID outbreaks and a further slowdown in property construction. Policy support should improve the picture later in the year, but mounting structural headwinds will limit the extent of any rebound. Drop-In (08:00 GMT/16:00 HKT, 27th Jan): China Outlook – Cyclical trough, tepid rebound. Join Mark Williams and Julian Evans-Pritchard for a discussion about China’s economic and policy outlook this year. Register here.

26 January 2022

China Activity Monitor

Starting 2022 on the back foot

Our China Activity Proxy (CAP) suggests that China’s economy was still struggling to regain momentum at the end of last year amid troubles in the property sector and recurrent COVID outbreaks which continue to depress service sector activity. We think these headwinds will continue to hold back activity during the first half of this year.

24 January 2022

China Economics Weekly

Some relief for property developers

This week’s cut to policy rates is one of a succession of recent moves designed to stabilize residential property sales. Developers have also been given a little more breathing room in terms of their access to financing. These steps may not feed into a recovery in project starts, given the poor structural outlook for property demand. But they improve the immediate outlook for many developers. Meanwhile, Tianjin’s Omicron outbreak appears to be under control and COVID cases nationally have dropped to a two-month low. That appears to be encouraging slightly more people to make the trip home for Lunar New Year than a year ago. We’ll be discussing our expectations for policy, zero-COVID and the economy on Thursday (08:00 GMT/16:00 HKT) in an online briefing timed to coincide with publication of our next Outlook report. Please register here to join us and let us know in advance of any questions you’d like us to address.  

21 January 2022

More from Julian Evans-Pritchard

China Economics Weekly

Growth jitters, tech woes, Huarong lifeline

There was plenty for China watchers to digest during the past week. Weak data for July added to growth fears, with virus disruptions and tighter credit conditions meaning that worse is still to come. Meanwhile, a flurry of regulatory action and signs of a mounting campaign to reduce inequality further clouded the outlook for China’s big tech firms, and productivity growth more generally. On a more positive note, officials made some headway in defusing financial risks.

20 August 2021

China Economics Update

LPR on hold but cuts on the horizon

Commercial banks left the Loan Prime Rate (LPR) on hold for a 16th straight month today. But with the economy losing momentum, we think it won’t be long before the PBOC is guiding rates lower. Even so, another round of large-scale credit-led stimulus doesn’t appear to be on the cards for now.

20 August 2021

China Economics Update

Inequality moves up the CPC’s agenda

China’s leadership has signalled a growing focus on reducing inequality. This could boost the productivity of low-income households and speed up the long-touted rebalancing toward consumption. But, if taken too far, it risks dampening the competitive pressures that are central to fostering innovation and economic efficiency. And even if the economy ends up benefiting overall, the “common prosperity” campaign is yet another reason to be cautious on the outlook for Chinese equities.

19 August 2021
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