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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 Economics Weekly

PBOC turns less dovish on inflation

The PBOC’s latest monetary policy report struck a less dovish tone, warning that inflationary pressure may increase in the near-term. We think these concerns are overdone and that inflation is more likely to drop back over the rest of the year. But for now at least, the PBOC appears to see inflation risks as yet another reason to maintain its restrained approach to stimulus.

12 August 2022

China Data Response

China Bank Lending & Broad Credit (Jul.)

Credit growth dropped back last month, with property market jitters weighing on bank lending. It may continue to disappoint in the near-term given that sentiment among homebuyers is likely to stay weak and government borrowing is on course to slow.

12 August 2022

China Data Response

China Consumer & Producer Prices (Jul.)

Consumer price inflation rose to a 24-month high in July and is now nearing the government’s target of 3%. But that is still very low by global standards, and we think headline inflation is close to a peak and will drop back over the coming quarters. Meanwhile, producer price inflation fell to its lowest in 17 months.

10 August 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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