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LPR on hold but cuts on the horizon

Commercial banks left the Loan Prime Rate (LPR) on hold for a 16th straight month today. But with the economy losing momentum, we think it won’t be long before the PBOC is guiding rates lower. Even so, another round of large-scale credit-led stimulus doesn’t appear to be on the cards for now.
Julian Evans-Pritchard Senior China Economist
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China Economics Weekly

How quickly can activity rebound?

China’s previous COVID outbreaks offer a few clues to how quickly the economy will rebound this time. Even if further large-scale lockdowns are avoided, activity is unlikely to have recovered in full until near the end of the year, with the service sector slower to get back on its feet than industry.
Asia Drop-In (26th May, 0900 BST/16:00 SGT): Can Asia remain the low inflation exception? Join our 20-minute briefing about the region’s price and policy outlooks. Register here.

20 May 2022

China Economics Update

A helping hand for the housing market

Today’s reduction to the five-year Loan Prime Rate (LPR) should help drive a revival in housing sales, which have gone from bad to worse recently. But the lack of any reduction to the one-year LPR suggests that the PBOC is trying to keep easing targeted and that we shouldn’t expect large-scale stimulus of the kind that we saw in 2020.

20 May 2022

China Data Response

China Activity & Spending (Apr.)

The April data were even weaker than expected and are consistent with a sharp contraction in economic activity. Provided that the virus situation continues to improve, the economy should begin to rebound this month. But the recovery is likely to be tepid.

16 May 2022

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China Economics Update

Inequality moves up the CPC’s agenda

China’s leadership has signalled a growing focus on reducing inequality. This could boost the productivity of low-income households and speed up the long-touted rebalancing toward consumption. But, if taken too far, it risks dampening the competitive pressures that are central to fostering innovation and economic efficiency. And even if the economy ends up benefiting overall, the “common prosperity” campaign is yet another reason to be cautious on the outlook for Chinese equities.

19 August 2021

China Data Response

China Activity & Spending (Jul.)

There was a broad-based slowdown in all the key indicators last month. This partly reflects disruptions to consumer activity due to the recent virus flare-up and flooding in central China. But investment spending and industrial activity, which are less sensitive to virus restrictions, also weakened markedly, suggesting that tighter credit conditions are biting. The drop back in consumption should reverse once the virus situation is brought under control and restrictions are lifted. But we think the slowdown elsewhere will deepen over the rest of the year.

16 August 2021

China Data Response

China PMIs (Jul.)

The latest surveys suggest that the pace of growth slowed more than expected last month. Supply bottlenecks remain a constraint. But the PMIs suggest demand is cooling too, taking the heat out of price gains and weighing on activity in industry and construction. China slowdown webinar: Join us on Thursday, 5th August for a special webinar assessing the impact of China’s economic slowdown on the global recovery. Neil Shearing will lead a discussion with economists from across our economics and markets services to assess whether investors should brace for fresh volatility with China poised for a structural deceleration. Register here for sessions at 0900 BST/1600 HKT or 1100 ET/1600 BST.

2 August 2021
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