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China Economics Weekly

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 Weekly

Testing, testing, testing

The outlines of a new, more stringent zero-COVID approach are emerging in China, in the wake of the failure to control infections in Shanghai. If successful, there should be less supply chain disruption than has been seen recently. But greater vigilance will prevent much service sector activity returning to normal. Meanwhile, there is no sign in real-time data on construction activity of any infrastructure push getting underway.

13 May 2022

China Economics Weekly

Tech sector reprieve, cyclical trough?

Officials are turning less hostile toward tech firms. But the economic drag from the regulatory crackdown, which we think has knocked 0.3%-pts off of annual GDP growth, is unlikely to dissipate entirely. Meanwhile, although the early indicators for April have been dismal there are some signs that the economy could start to recover this month, albeit tepidly.

6 May 2022
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China Economics Weekly

Lack of finance undermines Xi’s infrastructure push

Today’s Politburo meeting repeated Xi’s recent call for a step-up in infrastructure construction. A shift is already underway on the ground, with spending accelerating. But the scope for even faster rises is limited by financing constraints.

China Economics Weekly

PBOC will embrace the renminbi’s decline

The People’s Bank appears to have been pushing against the renminbi’s strength for a while. This week, finally, the market responded. The PBOC doesn’t have much tolerance for sharp market moves and probably won’t want to see depreciation continue at the rate of the past few days. But in an environment of weakening export demand, and with no major domestic inflation concerns, it is likely to welcome a period of gradual depreciation. Meanwhile, although the extension of some control measures in Shanghai is unwelcome news for many, community transmission of COVID-19 in the city is now in rapid retreat and most economic indicators are showing gradual recovery.

China Economics Weekly

Logistics under pressure but virus situation improving

China’s economy is still reeling from the impact of COVID-19 restrictions. Although the hit remains most severe in services, disruption to trucking has added pressure to industrial supply chains in recent weeks. The outlook remains highly uncertain but there are signs that the virus situation is starting to improve and that the focus of officials is shifting toward helping the economy get back on its feet. The State Council has signaled that a RRR cut is coming, most likely within days.
We are sending the Weekly earlier than usual as our Singapore office is closed on Good Friday.

China Economics Weekly

Housing market revival delayed by outbreak

Prior to the latest COVID-19 outbreak, China’s housing market had appeared on the cusp of a rebound. But movement restrictions and weaker consumer confidence have since caused home sales to slump, further weighing on the outlook for property construction. Coupled with the wider hit to services activity, this strengthens the case for additional policy support, which officials have signaled is forthcoming. There is a decent chance of a cut to reserve requirements in the coming days.

China Economics Weekly

Services suffering

Incoming data over recent days have been worse than generally expected and probably still don’t fully reflect the extent of current economic disruption in China. The week has ended with some positive news though, of new case numbers falling in Shanghai and nationwide.

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