Growth hits a two-year high

Our China Activity Proxy (CAP) suggests that growth continued to accelerate last month, thanks to policy stimulus, strong foreign demand and fewer constraints on services activity. On our estimates, China has fully recovered from the COVID-19 downturn and is now expanding at its fastest pace since mid-2018.
Julian Evans-Pritchard Senior China Economist
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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

Where might markets be wrong about Evergrande?

If Evergrande were to cause a financial or economic shock it would either be because policymakers failed to contain financial contagion or because the company’s collapse precipitated a much bigger decline in construction activity than most investors currently expect. The latter is probably the bigger risk and hinges on whether the company’s demise triggers a substantial drop in property sales.

22 September 2021

More from Julian Evans-Pritchard

Long Run Update

Employment already declining at pace

Revisions to the historic data following the recent census show that China’s population barely grew last year and that employment is already contracting faster than previously understood, having peaked in 2014 rather than 2017. The silver-lining, however, is that the new data suggest that productivity growth has slowed by less and that there is greater scope to counter demographic headwinds by boosting participation rates over the coming decades.

1 July 2021

China Data Response

China Caixin Manufacturing PMI (Jun.)

The Caixin manufacturing index published today dropped back last month and adds to signs from the official PMI released yesterday that momentum in industry is waning. The surveys point to a levelling off in demand and easing of price pressures, even as supply shortages continue to constrain output.

1 July 2021

China Chart Book

No, China isn’t exporting inflation

Some believe that China is adding to global inflationary pressure. The opposite is closer to the truth: the large increase in China’s trade surplus over the past year signals that supply from China has risen far more than demand. Global consumer goods prices are rising in spite of China, not because of it. Admittedly, China’s rapid, investment-intensive recovery has been an important factor in the rise in global commodity prices over the past year – this is the key reason why China’s producer price inflation hit a 12-year high last month. But China’s contribution to the surge in global demand for consumer durables has been relatively small – unlike in many major economies, retail spending on goods in China is not particularly strong. And while dollar prices of goods from China have risen over the past year, these price hikes have generally failed to keep up with the pace of renminbi appreciation. In renminbi terms, export prices have been falling unusually fast.

30 June 2021
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