LPR unchanged as PBOC relies on other policy tools

Commercial banks left the Loan Prime Rate (LPR) on hold today. Given that official efforts to rein in credit are being achieved by other means, we do not expect any changes to policy rates in the coming months.
Julian Evans-Pritchard Senior China Economist
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China Economics Weekly

US-China rivalry: industrial policy, vaccine diplomacy

The US Senate took a leaf out of China’s industrial policy playbook this week by passing USICA, a bill that earmarks $190bn in federal funding for strategic sectors and bears striking similarities with Beijing’s controversial Made in China 2025 plan. But despite some overlap, China’s industrial policies clearly remain far broader in scope and run a much greater risk of hindering rather than helping productivity growth. Another burgeoning area of US-China competition is vaccine diplomacy. Here China has the clear lead, at least in terms of the quantity of vaccine exports. And the ongoing surge in domestic production and vaccination rates means that China could soon flood the world with doses on a far larger scale than other countries, including the US.

11 June 2021

China Data Response

China Bank Lending & Broad Credit (May)

Broad credit growth continued to slide in May and is now at its slowest since February last year. Evidence of policy tightening weighing on borrowing is clearest in bank loan growth which, apart from during last year’s lockdown, is at its weakest in nearly two decades. This will become a headwind to the economy in the second half of the year.

10 June 2021

China Data Response

China Consumer & Producer Prices (May)

Producer price inflation continued to surge and reached its highest level since September 2008 last month, on the back of a further rise in global commodity prices. That said, there are some signs in the data that upward pressure on the factory-gate prices of consumer electronics may be starting to ease. And while consumer price inflation continued to rise, it remains relatively contained.

9 June 2021

More from Julian Evans-Pritchard

China Data Response

China Caixin Manufacturing PMI (May)

Unlike the official PMI survey released yesterday, the Caixin manufacturing index published today rose last month. The key takeaway is that while output edged up on the back of still strong demand, supply shortages remain a headwind, leading to a rundown in inventories and higher prices.

1 June 2021

China Chart Book

The three-child policy: too little, too late

State media announced today that China’s family planning policy will be relaxed to allow all families to have three children, up from the current limit of two. This comes shortly after China’s once-a-decade census showed that its population is aging even faster than previously expected. The policy shift will do little to alter the downward trend in births, however. It is largely economic and social trends, rather than family planning policy, that are behind the decline in China’s fertility rate in recent decades, much of which predates the one-child policy. With small family sizes now well ingrained into the fabric of Chinese society, there is little that policymakers can do to turn back the clock. The relaxation and eventual abolishment of the one-child policy around the middle of the last decade only nudged up the fertility rate marginally, with the impact on aggregate births quickly overwhelmed by a sharp decline in the number of women of childbearing age. Raising the cap from two children to three will move the needle even less.

31 May 2021

China Data Response

China Official PMIs (May)

The latest surveys suggest that stronger construction activity nudged up overall growth this month and that supply shortages are pushing up prices even as final demand for manufactured goods appears to be levelling off.

31 May 2021
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