China Trade (Sep.)

September exports beat even our above-consensus expectations. Coupled with separate data showing that electricity consumption held up well last month, this suggests that the hit from power rationing has largely been confined to a few energy-intensive industries and did not hold back wider manufacturing activity as many had feared.
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

A property tax could make up for fewer land sales

Local governments in China are far less reliant on land sales as a source of revenue than is often claimed. While slowing real estate development will create a funding gap, it could be more than offset with a modest property tax.

5 October 2021

China Economics Weekly

Power supply steady, heavy industry under pressure

Early data suggest that recent electricity rationing may be the result of power companies being unable to keep up with the strength of demand, rather than a substantial pullback in electricity supply. If so, then sharp falls in output across the whole of industry have probably been avoided. But the energy-intensive sectors that have been the focus of power restrictions are clearly under pressure.

1 October 2021

China Chart Book

Power shortages another blow to global supply chains

We still don’t have enough data to judge the extent of the disruption to China’s factory output from power rationing with much certainty. But with supply chains already stretched, even a modest hit to output, which producers downstream might normally cover by dipping into inventories, could affect firms’ ability to meet orders. It’s therefore concerning that the number of ships idling outside Chinese ports has jumped again in recent weeks. The initial catalyst for the spike was short-lived disruption to port operations from Typhoon Chanthu which hit China’s east coast on 12th But port congestion remaining very elevated more than two weeks later may be a sign that power rationing along the supply chain is interfering with ports’ ability to ship orders. Disruption is likely to worsen in the short-run given that the current shortage of thermal coal needed to meet power demand won’t be resolved overnight.

30 September 2021
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