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This page has been updated with additional analysis since first publication . Impact of tariffs starting to show up in survey data The drop in the PMIs likely overstates the impact of tariffs due to negative sentiment effects, but it still suggests that …
30th April 2025
China Chart Pack (Apr. 25) …
29th April 2025
Our China Activity Proxy calls into question the consensus view, based on the official GDP figures, that China’s economy remained resilient at the start of this year. Despite some improvement in March, the CAP suggests that growth last quarter slipped …
Parts of South East Asia, notably Vietnam, as well as India are well placed to immediately gain market share in response to penal US tariffs on Chinese imports. But uncertainty over the future tariff landscape will deter investment in additional capacity …
China continues to rebuff Trump Earlier this week, President Trump gave the clearest indication yet that he is keen to row back tariffs on China, which he said would “come down substantially”. But, for now at least, the White House has ruled out doing so …
25th April 2025
Leadership signals policy flexibility in the face of trade uncertainty The Politburo has just concluded its April meeting which, as usual, focused on economic affairs. The communique signalled that monetary policy easing is still on its way and that …
Retail sales in China are more than ten times larger than the country’s exports to the US. As such, domestic goods consumption would only need to rise by a few percent over the next couple of years to fully offset the hit from US tariffs. But this would …
22nd April 2025
Both sides are taking an axe to economic ties We’ve argued for years that geopolitical forces are fracturing the global economy into blocs, with the key fault line being the US-China rivalry. Until recently, this had been a gradual shift that was …
17th April 2025
Q1 ended on a stronger note thanks to fiscal boost China’s economy regained some momentum in March thanks to fiscal support, which helped the Q1 GDP figures beat expectations. Still, this wasn ’t enough to deliver faster growth over the quarter as a …
16th April 2025
Punitive tariffs have the potential to cause a substantial fall in US imports from China – a 60% tariff, for example, could cut imports from China by about a third over the next two years, with further falls after that. Some countries that face lower US …
15th April 2025
Available data don’t give a definitive answer to whether sales by Chinese institutions contributed to the recent volatility in the US bond market. But China’s state managers of foreign assets still appear to have more than half of their portfolios …
14th April 2025
A final hurrah Export growth accelerated in March, as manufacturers rushed to ship goods to the US ahead of “Liberation Day”. But shipments are set to drop back over the coming months and quarters. We think it could be years before Chinese exports regain …
Loan growth no longer slowing Bank loan growth accelerated for the first time in over two years last month, helping to take broad credit growth to a 10-month high. While some further gains are likely, we still expect a more modest pick-up compared to …
At some point a partial rollback in tariffs is likely… The effective US tariff rate on China started the year at 11% (based on 2024 weights). It is now at 145%. Earlier this week we noted that tariff rates above 100% would cause Chinese exports to the US …
11th April 2025
President Trump’s trade war has created material downside risks for the global economy. Our forecasts assume that tariffs on most countries outside China will stay at 10% and retaliation by other governments will be moderate. In this scenario, global GDP …
10th April 2025
Trade war to exacerbate deflation Deflationary pressures persisted last month and will almost certainly deepen over the coming quarters as it becomes more difficult for Chinese firms to export their excess supply. CPI deflation eased from -0.7% y/y in …
Unless they are rolled back, the latest US tariff hikes mean that China’s shipments to the US will more than halve over the coming years, even assuming the renminbi weakens to 8.00/$. This will reduce China’s GDP by somewhere between 1.0-1.5% depending on …
9th April 2025
A weaker renminbi, just not against the dollar China’s response today to President Trump’s 34% “reciprocal tariff” on China was more aggressive than we had anticipated . (Initial thoughts on Trump’s tariff on China can be found here .) The moves take the …
4th April 2025
China has responded to US tariffs with an additional 34% tariff on all US goods, the most sweeping it has ever imposed. Some US companies have also been added to China’s unreliable entities list and export controls have been expanded. This is an …
We hosted two online Drop-In sessions on 3 rd April to discuss the fallout from President Trump’s Liberation Day tariff announcement. (See a recording here .) This Update contains answers to some of the questions that we received and links to several more …
3rd April 2025
We’d already assumed substantial US tariffs on China in our forecasts. But the latest hikes take them even higher than we had anticipated. The economic hit to China will range between 0.5-1.0% of GDP depending on what happens to the exchange rate. China …
Whilst buying gold may reduce central banks’ overall exposure to the dollar, we don’t think that the surge in central bank gold demand reflects a severe loss of confidence in the greenback. Instead, the perception of gold itself as a safe haven is …
31st March 2025
The US would have to exert a lot of pressure to coerce most major countries into putting large tariffs on goods from China . Curtailing trade with China would have an economic cost and even countries that have closer economic ties with the US would still …
Services weakness holding back growth This report was first published on the 31 st March covering the official PMIs. We added commentary on the Caixin manufacturing PMI on 1 st April. The PMIs suggest that infrastructure spending is ramping up again and …
China Chart Pack (Mar. 25) …
28th March 2025
Exports will take a hit soon The US vehicle tariffs announced this week will do little damage to China as its auto exports to the US account for less than 0.05% of GDP. But the “ reciprocal tariffs ” that President Trump is due to announce on Wednesday …
In this Update, we answer several key questions about how the announced 25% tariffs on US imports of autos and parts might affect the global economy and the US itself. Mexico, Slovakia and Korea are most exposed with up to 1.6% of GDP at risk. But the …
27th March 2025
Overview – Increased US tariffs will exacerbate a broader slowdown in exports. China’s economy will also face continued drags from the property downturn and wider deflationary dynamics. A sizeable fiscal loosening will provide a partial offset but won’t …
26th March 2025
It is becoming clear that President Trump’s actions are driven by both his fixation on reducing the US trade deficit and his transactional approach to dealing with other countries. So, even though the Trump administration’s ideas to transform the entire …
25th March 2025
Our China Activity Proxy suggests that China’s economy slowed over January and February, driven by a sharp slowdown in services sector growth. Fiscal expenditure is set to pick up over the coming months, but that will largely be offset by the drag from US …
24th March 2025
Structural weakness weighs on long-run outlook While China’s treasury yields have picked up in recent weeks, we don’t think that the trend decline of the last decade is over. We expect China’s 10-year government bond yield to fall below Japan’s this year, …
21st March 2025
China’s presence in Latin America is increasingly seen as a strategic threat by the US. This Focus uses interactive charts to map out economic, financial and institutional linkages between China and Latin America. While ties have expanded dramatically …
19th March 2025
Deflation has reared its head again in China, underscoring the problem of persistent supply and demand imbalances. The limited extra support for consumption outlined at the National People’s Congress and in the new “Special Action Plan” for consumption …
18th March 2025
China’s government has launched a new “Special Action Plan” to support consumption. Talk of prioritising consumption is encouraging on paper. But the leadership has been talking about this since a Politburo meeting in July. The latest plan doesn’t include …
17th March 2025
Recovery hits a speed bump China’s economy appears to have slowed last month, likely due to a pullback fiscal borrowing. We expect a renewed pick-up later this year as fiscal support ramps up again. But any near-term improvement is unlikely to be …
Bond market investors don’t seem to believe that monetary policy will be eased any further in China. Two-year yields have risen from 1.0% to 1.5% since the start of the year, putting them into line with overnight rates. They are higher now than they were …
14th March 2025
Broad credit growth picks up, but private demand still weak While bank loan growth continued to slow to record lows in February, that was more than offset by stronger growth in non-bank credit. Strong government bond issuance should continue to provide a …
Deflation fears return CPI joined PPI in deflationary territory last month for the first time in more than a year. While this was partly driven by the usual price volatility around Lunar New Year, the January-February average was also negative, evidence …
10th March 2025
NPC points to a renewed pick-up in fiscal spending The announcements out of the National People’s Congress (NPC) confirmed that China’s budget deficit will widen this year. But given the complexity of the Ministry of Finance’s fiscal projections, the …
7th March 2025
Foreign and domestic demand both under pressure Export growth cooled over the first two months of 2025, with tariff front-running providing less of a boost to demand than we had anticipated. This slowdown comes before any substantial hit from tariffs, …
Notice: This publication was revised on 07/03 to accurately reflect the deficit on the funds budget in 2024, taking into account the funds used for the local government refinancing scheme that year. The original version of the publication stated that …
5th March 2025
Little prospect of a reflationary rebound Chinese policymakers have stuck with an ambitious target for real GDP growth but have become more cautious on the outlook for nominal growth and inflation. And while they did deliver some increase in fiscal …
The events of the past two weeks have called into question whether the US is severing ties not just with adversaries such as China but also allies, including Canada, Mexico and the European Union. This would radically alter the shape of the fractured …
4th March 2025
Policy support struggling to deliver sustained rebound The PMIs suggest that a combination of fiscal support and tariff front-running helped China’s economy regain some momentum in February. But growth still looks at risk of slowing this quarter, at …
3rd March 2025
China Chart Pack (Feb. 25) …
28th February 2025
Fiscal deficit and consumption support will be key China’s National People’s Congress kicks off its annual gathering on Wednesday. While the meeting tends to last around a week, the most important events, including the delivery of the Work Report and …
With US tariffs now escalating, the key question is whether the People’s Bank (PBOC) will allow the exchange rate to adjust in response. We think it ultimately will, just as it did during the first trade war. But if we’re wrong and the PBOC attempts to …
President Trump’s attempts to reset relations with Russia have led some to suggest that he may be attempting to break apart the Sino-Russian alliance as Nixon did in the early 1970s (although in Nixon’s case, by reaching out to China). But while this may …
27th February 2025
Policy support is helping developers secure financing and should boost their sales this year. This will allow them to intensify work on existing projects. But it won’t prevent homebuilding activity from declining further over the coming years as the …
This year’s National People’s Congress (NPC) is taking place against a difficult backdrop for China’s economy; stimulus efforts have so far had only a fleeting impact on activity, even as the Trump administration has started raising barriers further to …
25th February 2025
