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LPR cuts appear imminent

Commercial banks left the Loan Prime Rate (LPR) on hold for a 17th consecutive month today. But with the economy losing steam and concerns around the property sector growing, we think policy rate cuts by the PBOC could come as soon as next month.
Julian Evans-Pritchard Senior China Economist
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China Economics Weekly

PBOC turns less dovish on inflation

The PBOC’s latest monetary policy report struck a less dovish tone, warning that inflationary pressure may increase in the near-term. We think these concerns are overdone and that inflation is more likely to drop back over the rest of the year. But for now at least, the PBOC appears to see inflation risks as yet another reason to maintain its restrained approach to stimulus.

12 August 2022

China Data Response

China Bank Lending & Broad Credit (Jul.)

Credit growth dropped back last month, with property market jitters weighing on bank lending. It may continue to disappoint in the near-term given that sentiment among homebuyers is likely to stay weak and government borrowing is on course to slow.

12 August 2022

China Data Response

China Consumer & Producer Prices (Jul.)

Consumer price inflation rose to a 24-month high in July and is now nearing the government’s target of 3%. But that is still very low by global standards, and we think headline inflation is close to a peak and will drop back over the coming quarters. Meanwhile, producer price inflation fell to its lowest in 17 months.

10 August 2022

More from Julian Evans-Pritchard

China Economics Weekly

Property sector leverage, China’s CPTPP bid

Evergrande is the poster child for the excesses of China’s property sector, and its short-term liabilities are particularly high. But the sector is full of similarly-leveraged peers. Indeed, nearly all of the huge expansion in the leverage of listed Chinese firms since the Global Financial Crisis was driven by property developers. Meanwhile, Australia’s new security pact with the US and UK underlines how unlikely it is that China’s bid this week to join the CPTPP will succeed.

17 September 2021

China Economics Focus

Mapping decoupling

China and countries that align more closely with it than with the US together account for around half of the world’s population. But the China bloc is far smaller economically than the US bloc and far more dependent on the rival bloc as a source both of imports and of export demand. Our decoupling map illustrates the economic challenge that division from the West would pose for China.

17 September 2021

China Data Response

China Activity & Spending (Aug.)

The hit to service activity from last month’s virus outbreak was even larger than we, and other forecasters, had anticipated. The rest of the economy held up better, although the headwinds facing the property sector appear to be intensifying.

15 September 2021
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