Property downturn deepens, triggering easing

Supply-side disruptions mean there is an unusual amount of uncertainty about China’s recent economic performance. But one thing that’s clear is that the property sector downturn has gathered pace in recent weeks. Policymakers have responded by allowing banks to step up mortgage lending. Other easing measures are likely to follow, including rate cuts. But limits on developer financing are here to stay.
Julian Evans-Pritchard Senior China Economist
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China Data Response

China Caixin Manufacturing PMI (Nov.)

The Caixin manufacturing index published today slipped under 50 last month on the back of softer domestic demand. This contrasts with the official survey released yesterday. Taken together, the surveys still suggest that industrial output rebounded in November as power shortages abated. And they also point to easing factory-gate price pressures. Drop-In: Why is Asia sitting out the global inflation surge? 09:00 GMT/17:00 HKT, Thursday 2nd December https://event.on24.com/wcc/r/3546145/A9D34EF592141BEFCAC819ADB40359D5?partnerref=report

1 December 2021

China Data Response

China Official PMIs (Nov.)

The official PMIs suggest that industrial activity rebounded this month thanks to easing disruptions from power shortages while a renewed virus flare-up held back the recovery in services. And while we know little about its transmissibility and severity, the new Omicron variant could hold back a further economic recovery. On a more positive note, the surveys point to easing price pressures.

30 November 2021

China Chart Book

Omicron tests China’s zero-COVID strategy

The global spread of a more transmissible COVID variant is a particular challenge for a country trying to remain COVID-free. But after nearly two years of success suppressing infections domestically, the bar to changing course before better medical treatments or vaccines are available is high. A study published last week by the Chinese Center for Disease Control and Prevention estimated that if China were to adopt the pandemic control measures recently in place in several Western countries, it would soon be facing several hundred thousand new cases per day and 10-20,000 severe cases. These estimates were deliberately conservative, made on the assumption that natural and vaccine-derived immunity is as high in China as in the comparator countries. The actual health cost, the authors argue, would almost certainly be higher. Given these concerns, if Omicron proves harder to contain than Delta, we would expect officials to tighten containment measures in response. Economically, that would lead to further intermittent disruption to domestic activity, particularly services, and to global supply chains.

29 November 2021

More from Julian Evans-Pritchard

China Data Response

China Bank Lending & Broad Credit (Sep.)

Broad credit growth continued to slide in September and is now at its slowest pace since December 2005. We think credit growth will level off in the coming quarters, as PBOC policy turns more supportive in response to strains in the property sector. But the usual lags mean that tight credit conditions will remain a headwind to economic activity for a while.

13 October 2021

China Data Response

China Trade (Sep.)

September exports beat even our above-consensus expectations. Coupled with separate data showing that electricity consumption held up well last month, this suggests that the hit from power rationing has largely been confined to a few energy-intensive industries and did not hold back wider manufacturing activity as many had feared.

13 October 2021

China Economics Update

A property tax could make up for fewer land sales

Local governments in China are far less reliant on land sales as a source of revenue than is often claimed. While slowing real estate development will create a funding gap, it could be more than offset with a modest property tax.

5 October 2021
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