2011 Results

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China Economics Weekly

Capacity constraints put a ceiling on export outlook

In the long-run, the global spread of highly-transmissible coronavirus strains may make China’s zero-COVID stance untenable but the immediate response to concerns about B.1.1.529  is more likely to be a doubling down on the strategy, with rolling local lockdowns in response to any local cases and continued tight border controls. China’s exporters could benefit from another wave of lockdown-induced demand elsewhere in the world. But capacity limits, particularly at ports, potentially exacerbated by further port shutdowns, may limit their ability to meet orders.

26 November 2021

China Activity Monitor

Service sector recovery remains lacklustre

Our China Activity Proxy (CAP) shows that growth ticked up last month as energy shortages eased and the service sector continued to recover from virus disruptions over the summer. But the rebound remains lacklustre, with output still well below June’s peak. And while the outlook for home sales and exports has brightened in recent weeks, cooling construction activity still looks set to weigh on growth next year.

24 November 2021

China Economics Update

LPR on hold but wider easing already underway

The Loan Prime Rate (LPR) remained unchanged for the 19th consecutive month today. But officials are already easing policy in other ways, such as by relaxing constraints on mortgage lending. The PBOC has also pushed down bank funding costs via recent deposit rate reforms and July’s RRR cut, paving the way for future moves to nudge down lending rates using LPR cuts.

22 November 2021

China Economics Weekly

Outbreak quashed, land auction rules eased

Local authorities in China appear to be becoming more adept at bringing Covid outbreaks under control with relatively little disruption to economic activity. Meanwhile, this week’s easing of land auction rules is the latest in a series of moves to support China’s struggling property sector. We think home sales are on the cusp of a rebound. But it will take much longer for developers to start ramping up construction again.

19 November 2021

China Economics Update

Home sales on the cusp of a rebound

New home sales have dropped by a fifth since March, a similar-sized slump to those seen during the previous two housing downturns. With policy now turning more supportive, high-frequency data suggest that sales are bottoming out and a cyclical rebound looks increasingly likely. This should quash fears of a housing market crash. But financing constraints will continue to limit new construction and property investment is unlikely to bottom out until late next year.

19 November 2021

China Data Response

China Activity & Spending (Oct.)

Industrial growth rebounded last month as energy shortages eased. But this pick-up is likely to be short-lived given the deepening downturn in property construction. And while retail sales also improved last month, the pace of recovery slowed and the near-term outlook for services activity is being clouded by renewed virus outbreaks.

15 November 2021

China Economics Weekly

Policymakers are stressing developers not markets

This week’s sell-off in Chinese high-yield dollar bonds is not a good measure of the stress facing Chinese developers. These bonds account for less than a tenth of developer debt. Their key creditors are domestic banks. Whether developers can refinance their debt therefore depends primarily not on conditions in the offshore market but on the political and regulatory constraints on bank lending.

12 November 2021

China Data Response

China Bank Lending & Broad Credit (Oct.)

Broad credit growth levelled off in October having previously decelerated to its slowest pace since December 2005. There are some signs that PBOC policy is turning more supportive in response to strains in the property sector. As such, we think this might be the trough in the credit cycle. But the usual lags mean that tight credit conditions will remain a headwind to economic activity for a while.

10 November 2021

China Data Response

China Consumer & Producer Prices (Oct.)

Producer price inflation continued to surge and reached a new high last month. But this largely reflects temporary disruption in a handful of industries from energy shortages, which are already easing. There are still few signs of wider price pressures and we think PPI inflation is likely to drop back in the coming months while CPI inflation looks set to remain muted for the foreseeable future.

10 November 2021

China Data Response

China Trade (Oct.)

Exports continued to soar last month while imports took another leg down despite directives to raise coal supply amid power rationing. As a result, the trade surplus reached its highest level since January 2015 in seasonally adjusted terms. That said, we continue to think shipments will soften in the coming quarters.

8 November 2021

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