China PMIs (Sep.)

The manufacturing PMIs diverged this month. But the big picture is that industry was coming off the boil even prior to the latest power shortages. On a more upbeat note, the official surveys point to a sharp rebound in services activity, which is probably enough to ensure that overall economic output picked up this month, partially reversing a sharp decline in August.
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 Update

Power rationing adds to mounting headwinds

China’s power shortages are a reflection of the global strain in energy markets and won’t be resolved overnight. Power rationing will constrain industrial activity until demand weakens enough to bring the domestic electricity market back into equilibrium.

29 September 2021

CE Spotlight

Will US-China decoupling be inflationary?

China’s integration into the global economy contributed to the low inflation environment of recent decades. But it was not the major driver and, in any case, China’s integration peaked several years ago. Decoupling may be inflationary, but as long as it happened gradually, the impact would be small. Abrupt decoupling in key sectors would be a different story, sending prices soaring until new supply chains could be formed.

28 September 2021

China Activity Monitor

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.

27 September 2021
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