China Economics Update

China Economics Update

The global implications of a slowdown in China

The slowdown that we anticipate in China over the next 6-12 months is best viewed as a return to normality following a period of above-trend output. While it will be a headwind to growth in some industrial commodity producers, we do not think it will derail recoveries in the world’s major advanced economies.

23 July 2021

China Economics Update

RRR cut marks shift in focus, even if not major easing

The People’s Bank (PBOC) has just announced a 50 basis point cut to the required reserve ratio (RRR) for most banks. This is less of a lurch towards monetary easing than it might seem at first glance – it is partly intended to offset tightening elsewhere. But it is nonetheless the clearest sign yet that policy priorities are shifting away from exiting stimulus towards managing structural headwinds.

9 July 2021

China Economics 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.

24 June 2021
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China Economics Update

LPR on hold as PBOC leans on other policy tools

Commercial banks left the Loan Prime Rate (LPR) on hold again today. The PBOC has now fully reversed last year’s credit acceleration using quantitative controls. Accordingly, policy rate hikes that could prompt LPR increases are unlikely in the near future.

China Economics Update

China is about to flood EMs with vaccines

By September, China could be in a position to export 340mn vaccines doses each month – more than most regions of the world have administered in total so far. China’s vaccines are less effective than others, but have been found to suppress outbreaks where they have been used if a high enough share of a population is vaccinated. Large-scale exports from China could therefore give a significant boost to the prospects of many EMs now struggling to vaccinate because of a lack of vaccine supply.

17 June 2021

China Economics Update

Dependence on Australian iron ore set to decline

In the short-run, China has no choice but to grit its teeth and keep buying Australian iron ore, even as bilateral ties continue to fray. But this dependence will diminish over time thanks to increased supply from other sources, greater use of recycled steel and a structural decline in Chinese steel demand. It may be feasible for China to cut off Australian iron ore shipments by the middle of the decade.

China Economics Update

PBOC credit objectives being met without LPR hikes

Commercial banks left the Loan Prime Rate (LPR) unchanged for the 13th consecutive month today. Official goals for reining in credit have already been achieved by other means. As such, we do not expect any changes to policy rates in the coming months.

China Economics Update

China’s census: the good, the bad and the ugly

After a month-long delay, the key results from China’s once-a-decade census were published today. They weren’t as bad earlier media reports had suggested – the population continued to rise at much the same pace last decade as it did in the 2000s and, if anything, it appears that the annual figures for recent years may be revised up not down. But the details were less encouraging, with the census confirming that China is aging more rapidly than previously expected.

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