What might trigger a hard landing?

Structural headwinds will weigh on China’s growth rate over the coming decade. If well managed, this slowdown will be gradual. But a more abrupt adjustment shouldn’t be ruled out. We see two main threats – political instability that disrupts economic activity, and a policy misstep in the face of rising bad debt that causes interbank markets to seize up and precipitates a financial crisis.
Julian Evans-Pritchard Senior China Economist
Continue reading

More from China

China Data Response

China Official PMIs (Nov.)

The official PMIs suggest that industrial activity rebounded this month thanks to easing disruptions from power shortages while a renewed virus flare-up held back the recovery in services. And while we know little about its transmissibility and severity, the new Omicron variant could hold back a further economic recovery. On a more positive note, the surveys point to easing price pressures.

30 November 2021

China Chart Book

Omicron tests China’s zero-COVID strategy

The global spread of a more transmissible COVID variant is a particular challenge for a country trying to remain COVID-free. But after nearly two years of success suppressing infections domestically, the bar to changing course before better medical treatments or vaccines are available is high. A study published last week by the Chinese Center for Disease Control and Prevention estimated that if China were to adopt the pandemic control measures recently in place in several Western countries, it would soon be facing several hundred thousand new cases per day and 10-20,000 severe cases. These estimates were deliberately conservative, made on the assumption that natural and vaccine-derived immunity is as high in China as in the comparator countries. The actual health cost, the authors argue, would almost certainly be higher. Given these concerns, if Omicron proves harder to contain than Delta, we would expect officials to tighten containment measures in response. Economically, that would lead to further intermittent disruption to domestic activity, particularly services, and to global supply chains.

29 November 2021

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

More from Julian Evans-Pritchard

China Data Response

China Consumer & Producer Prices (Aug.)

Producer price inflation reached its highest since August 2008 last month due to the rally in global commodity prices. But the breakdown suggests that upward pressure on the factory-gate prices of consumer goods is easing. Coupled with continued declines in food prices, this dragged consumer price inflation back below 1%. We think PPI inflation is likely to ease before long while CPI inflation will remain muted this year.

9 September 2021

China Data Response

China Caixin Manufacturing PMI (Aug.)

The Caixin manufacturing index dropped to an 18-month low in August, adding to signs from the official PMI released yesterday that industry is coming off the boil. The surveys point to worsening supply shortages amid the Delta outbreak. But there are also signs that demand is weakening too.

1 September 2021

China Chart Book

Party soon to target property and healthcare costs

A WeChat post by a prominent blogger voicing support for Xi Jinping’s “common prosperity” campaign has been widely re-published by state media, giving it a rare seal of Party approval. The post argues that the recent regulatory crackdown is just the start of a “profound revolution” prioritising workers over capitalists. If the author is to be believed, the next areas to be addressed will be high housing and medical costs. Education, housing and healthcare are often referred to as the “three mountains” that Chinese households must climb to achieve a comfortable life but the costs of each have soared. The government has pledged before to keep prices in check, but its efforts now appear set to intensify. Public housing and healthcare is likely to be expanded while private medical providers and real estate developers could soon face greater constraints on their ability to set prices and pursue profits.

31 August 2021
↑ Back to top