Growth jitters, tech woes, Huarong lifeline

There was plenty for China watchers to digest during the past week. Weak data for July added to growth fears, with virus disruptions and tighter credit conditions meaning that worse is still to come. Meanwhile, a flurry of regulatory action and signs of a mounting campaign to reduce inequality further clouded the outlook for China’s big tech firms, and productivity growth more generally. On a more positive note, officials made some headway in defusing financial risks.
Julian Evans-Pritchard Senior China Economist
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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 Data Response

China GDP (Q4), Activity & Spending (Dec.)

Official GDP growth beat expectations last quarter and in q/q terms was the strongest since late 2020. But we are sceptical that this reflects the reality on the ground – our China Activity Proxy suggests output was largely stagnant last quarter. With the property sector still struggling and virus disruptions becoming more frequent, economic momentum is likely to remain weak throughout much of this year.

17 January 2022

China Economics Weekly

Omicron arrives

It is too soon to conclude that Omicron will swamp China’s efforts to suppress COVID. But the policy of “dynamic clearing” is facing a severe test. Data due over the coming week will reveal the economic strain that it is causing.

14 January 2022

More from Julian Evans-Pritchard

China Economics Update

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.

20 August 2021

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
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