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Mainland China

Official PMIs

The latest survey data suggest that economic growth accelerated in June thanks to a faster recovery in manufacturing and services, alongside continued strength in construction activity. The recovery should remain robust in the coming months as strong infrastructure spending offsets external weakness.

30 June 2020

LPR unchanged as rate cutting cycle nears an end

Commercial banks left the Loan Prime Rate (LPR) on hold today. We may see a cut or two next quarter but most signs suggest that the bulk of monetary easing this cycle has already taken place.

22 June 2020

Monetary easing cycle nearing an end

With fiscal stimulus ramping up and economic recovery well underway, the PBOC appears to see less of a need to encourage stronger private borrowing. Broad credit growth still looks set to accelerate further in the coming quarters. But short-term interest rates are unlikely to decline much further.

19 June 2020
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Activity & Spending (May)

State-led infrastructure construction jumped last month and pushed up growth in fixed asset investment and industrial production. Meanwhile, growth in services activity turned positive and suggests that overall economic output returned above 2019 levels in May for the first time since the COVID-19 outbreak.

“Old” beats “new” in near-term infrastructure boost

Despite all the recent focus on hi-tech “new infrastructure”, policymakers are still leaning far more heavily on traditional infrastructure construction, which looks set for a boom judging by the recent surge in excavator sales. Given that China’s physical infrastructure is already well developed, the medium-term returns on this investment are likely to be low. But in the short-run it will drive a rebound in the number of high paying jobs for migrant workers, who were hardest hit by the COVID-19 downturn. This in turn should ease the strains on household balance sheets that are holding back the recovery in consumption.

Consumer & Producer Prices (May)

Consumer price inflation slipped further last month due to falling food prices, while subdued demand continued to weigh on factory gate prices. But food prices aside, the recent decline in inflation could be nearing an end.

Which countries will rebound fastest?

The high-frequency data that we track suggest that while economic activity is picking up across most of the region, the pace of recovery varies significantly by country. We expect China, Singapore, Vietnam and Taiwan to bounce back quickest from the crisis, with South Asia and Thailand the slowest to recover.

Trade (May)

Export growth turned negative last month as lockdowns abroad weighted on global demand. And the ongoing domestic recovery failed to keep import growth from slipping further. A global recovery and further ramp up in stimulus should put a floor under growth in both imports and exports in H2, however.

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