Rapid spread of coronavirus adds to downside risks

There is no longer any doubt that the coronavirus outbreak will hurt China’s economy in Q1. While the impact should be short-lived and subsequently reversed, the public and official responses to the outbreak add downside risks to incoming activity and spending data for the next couple of months at least. There may be some early signs in the official PMIs, which are due on Friday next week. China’s Lunar New Year holiday has now begun which will make both controlling the virus and assessing its impact harder.
Julian Evans-Pritchard Senior China Economist
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China Activity Monitor

Starting 2022 on the back foot

Our China Activity Proxy (CAP) suggests that China’s economy was still struggling to regain momentum at the end of last year amid troubles in the property sector and recurrent COVID outbreaks which continue to depress service sector activity. We think these headwinds will continue to hold back activity during the first half of this year.

24 January 2022

China Economics Weekly

Some relief for property developers

This week’s cut to policy rates is one of a succession of recent moves designed to stabilize residential property sales. Developers have also been given a little more breathing room in terms of their access to financing. These steps may not feed into a recovery in project starts, given the poor structural outlook for property demand. But they improve the immediate outlook for many developers. Meanwhile, Tianjin’s Omicron outbreak appears to be under control and COVID cases nationally have dropped to a two-month low. That appears to be encouraging slightly more people to make the trip home for Lunar New Year than a year ago. We’ll be discussing our expectations for policy, zero-COVID and the economy on Thursday (08:00 GMT/16:00 HKT) in an online briefing timed to coincide with publication of our next Outlook report. Please register here to join us and let us know in advance of any questions you’d like us to address.  

21 January 2022

China Economics Update

Deposit rates may be next PBOC target

Today’s reductions to both the one-year and five-year Loan Prime Rates (LPR) continue the PBOC’s efforts to push down borrowing costs. We expect additional easing to follow in the coming months, including measures to push down deposit rates. But policymakers still appear reluctant to engineer a sharp pick-up in credit growth.

20 January 2022

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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