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.
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 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

China Economics Weekly

Outbreak quashed, land auction rules eased

Local authorities in China appear to be becoming more adept at bringing Covid outbreaks under control with relatively little disruption to economic activity. Meanwhile, this week’s easing of land auction rules is the latest in a series of moves to support China’s struggling property sector. We think home sales are on the cusp of a rebound. But it will take much longer for developers to start ramping up construction again.

19 November 2021

China Economics Update

Home sales on the cusp of a rebound

New home sales have dropped by a fifth since March, a similar-sized slump to those seen during the previous two housing downturns. With policy now turning more supportive, high-frequency data suggest that sales are bottoming out and a cyclical rebound looks increasingly likely. This should quash fears of a housing market crash. But financing constraints will continue to limit new construction and property investment is unlikely to bottom out until late next year.

19 November 2021
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