China Economics Update

China Economics Update

Deposit rates may be next PBOC target

Today’s reductions to both the one-year and five-year Loan Prime Rates (LPR) continue the PBOC’s efforts to push down borrowing costs. We expect additional easing to follow in the coming months, including measures to push down deposit rates. But policymakers still appear reluctant to engineer a sharp pick-up in credit growth.

20 January 2022

China Economics Update

PBOC takes a bigger bite of the easing apple

The People’s Bank (PBOC) has stepped up its efforts to loosen monetary conditions, following up last month’s reduction to the Loan Prime Rate (LPR) with cuts to the rates at which it lends to banks. Another LPR cut this month is now a given and we expect additional easing measures further ahead.

17 January 2022

China Economics Update

Why we still think the renminbi will weaken

China’s currency was remarkably stable against the US dollar in 2021 and appreciated against other major currencies. But we doubt that trend will continue this year: a slowing economy, monetary policy easing, and a gradual normalisation of China’s current account all point to a weaker renminbi. In view of the wider interest, this FX Markets Update is available to clients of our China Service.

13 January 2022
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China Economics Update

Peak homebuilding

The amount of residential floor space being built in China hit a record last year. With new project starts dropping sharply recently, the government has now unveiled plans to ramp up construction of low-cost rental housing. But this won’t offset the slowdown in the rest of the market. Property construction activity could soon fall outright and may never regain its recent highs. Drop-In: Neil Shearing will host an online panel of our senior economists to answer your questions and update on macro and markets this Thursday, 13th January (11:00 ET/16:00 GMT). Register for the latest on everything from Omicron to the Fed to our key calls for 2022. Registration here.

China Economics Update

A guide to political events in 2022

Korea, the Philippines and India are each holding elections this year that will play a role in setting fiscal and structural reform priorities, including the possible introduction of a universal basic income in Korea. And China looks set to tear up the leadership succession rules that have contributed to its unusual stability as an autocracy over recent decades. In view of the wider interest, we are also making this Emerging Asia Economics Update available to clients of our India and China services.

China Economics Update

What to expect in China in 2022

2022 will be a year of slower growth in China as the property and export sectors weaken and structural constraints loom larger. A desire to keep a grip on credit risks will inhibit the policy response to the slowdown. Xi Jinping’s decision not to step aside when his second term as Party leader ends will cement China’s shift to a more autocratic style of policymaking, with productivity growth likely to decelerate further as a result. And 2022 may be the year in which China’s population starts to go into decline.

China Economics Update

Easing cycle has further to run

The People’s Bank has taken another modest easing step with a 5bp reduction to the One-Year Loan Prime Rate, although it kept the Five-Year rate on hold. We expect more easing to follow in the coming months.

China Economics Update

RRR cut today, rate cuts tomorrow?

The People’s Bank (PBOC) has just announced a cut to the required reserve ratio (RRR) for most banks, shortly after Premier Li and the Politburo each separately hinted at an increase in policy support. There is already evidence of fiscal easing, and we expect policy rate cuts from the PBOC before long. That said, there still appears to be little appetite at the central bank for a sharp rebound in credit growth, and we’re seeing an opening of the fiscal taps, not a flood. This easing will cushion but not stop growth from slowing. Drop-In: China trade and the commodities demand outlook 08:00 GMT/16:00 HKT, Tuesday 7th December  

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