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President Trump has signalled that he is open to the possibility of a new trade deal with China, though probably not before tensions rachet up further. This would likely involve China committing to more purchases of US goods, particularly energy, …
25th February 2025
Xi symposium cements shift toward private sector President Xi’s meeting with China’s top tech leaders on Monday and Alibaba’s strong earnings report yesterday have added fuel to market optimism around China’s tech sector. Since DeepSeek’s AI model …
21st February 2025
The decision by the US and Russia to “lay the groundwork” to end the war in Ukraine marks a potentially significant turning point after three years of conflict. Negotiations will take time and the macroeconomic implications will depend on the features of …
18th February 2025
Drop in marriages worsens demographic woes The number of marriages in China dropped by a fifth last year, more than reversing the immediate post-zero-COVID bounce that happened in 2023. Half as many weddings took place as a decade before. The decline …
14th February 2025
Policy support still struggling to provide much uplift to broad credit growth Bank loan growth continued to slide to record lows, but this was offset by a pick-up in non-bank credit growth. Robust government bond issuance should continue supporting credit …
China is among a minority of countries that apply lower tariff rates on the US than vice versa, so it is not as obviously exposed to reciprocal tariffs as many others. But President Trump’s latest announcement underscores just how serious he is about …
China added five critical minerals to its export control list last week but stopped short of banning their sale. The move was intended as a warning to the Trump administration and to increase China’s leverage during future negotiations. If the US …
12th February 2025
The end of the de minimis tariff exemption for US imports of low-value goods from China will be a major blow to Chinese e-commerce giants like Temu and Shein. They’re likely to lose market share to foreign competitors like Amazon. But unless tariffs …
11th February 2025
Rise in inflation likely temporary Headline CPI inflation rose to a five-month high last month, driven by the lagged effect of stronger demand last quarter on the back of government efforts to boost consumption. But with the boost from stimulus likely to …
10th February 2025
Consumption rebound looking shaky Growth in retail sales and wider consumer spending accelerated last quarter, buoyed by the consumer goods trade-in scheme and broader fiscal support. But this recovery appears to have stalled at the start of 2025. Both …
7th February 2025
After initially promising unspecified "countermeasures", the Chinese authorities have now fleshed out their retaliation to the Trump administration's 10% tariff hike on all US imports from China. The measures are fairly modest, at least relative to US …
4th February 2025
The additional 10% tariff that Donald Trump has applied on Chinese goods will have a relatively modest impact on China’s economy, especially if the PBOC allows the renminbi to adjust. But this is likely just the first round in a protracted trade war with …
3rd February 2025
Growth outlook continues to sour Hong Kong’s GDP growth picked up a touch in Q4, expanding by 2.4% y/y in Q4, up from 1.8% in Q4 (the Bloomberg median was +2.7% and our forecast was +2.3%). In q/q terms the economy grew by 0.8% after contracting by 1.1% …
DeepSeek doesn’t mean China is overtaking in AI US markets reeled at the start of this week as DeepSeek’s launch of a “reasoning” model similar to the leading offering from OpenAI focused attention on the Chinese firm’s success in developing …
31st January 2025
The economy should accelerate over the near-term, driven by consumption-boosting policy support. But the stimulus-driven recovery will be short-lived. We expect growth to slow later in the year, as the impact of stimulus fades and US tariffs create a …
DeepSeek’s success in developing AI models that rival those of US tech-giants has rattled US markets. While this does suggest that catching up to the technological frontier in AI may be easier than many expected, it is not a sign that China is overtaking …
30th January 2025
Our China Activity Proxy suggests that activity picked up in December, but that was only enough to drive a modest uptick over Q4 as a whole. The CAP indicates that the economy grew by just 4.4% in 2024, well below the official figure of 5.0%. As a result …
28th January 2025
The raft of export restrictions introduced earlier this month are the latest escalation in China’s shift to a more assertive export control regime. The use of such non-tariff measures is likely to intensify over the coming years, if as we anticipate, …
27th January 2025
An unexpected loss of momentum The PMIs suggest that China’s economy lost some momentum in January, despite tailwinds from recent policy easing. The breakdown suggests that exporters were downbeat even ahead of Trump's latest tariff announcement. But …
Uncertainty over Trump’s tariff plans We still have little clarity on the timing or size of any tariff increases President Trump is planning to impose on China. On the one hand, Trump has threatened a 10% tariff to take effect on 1 st February in response …
24th January 2025
China’s surging exports have been gaining international attention, but concerns about overcapacity have focussed on “strategic sectors”. Far less acknowledged is the fact that China has been gaining significant global export market share across the board, …
22nd January 2025
Biden's final export control crackdown In the final days of his administration, Biden has (yet again) ramped up US export controls in a bid to slow China’s development of advanced AI. The new Interim Final Rule on Artificial Intelligence Diffusion …
17th January 2025
The Shape of the Fractured World in 2025 The share of the fracturing global economy that is accounted for by China and its geopolitical allies contracted in 2024, leaving it under a third the size of the US bloc at the start of 2025. This fall was in part …
Fiscal-driven recovery will be short-lived The economy ended 2024 on a stronger note, thanks to tailwinds from recent policy easing. Increased fiscal spending should continue to provide a near-term prop to activity, but this won’t prevent growth from …
We think China’s 10-year government bond yield will fall to fresh record lows over the coming year, partly because the other investment options available to Chinese investors look increasingly unappealing. Chinese government bond yields are around record …
16th January 2025
The debt swap that kicked off in November and extends to 2028 reduces the risk of near-term defaults by local government financing vehicles, which would be destabilising for financial markets. But it is not a lasting solution for China given it only …
15th January 2025
If Donald Trump were to impose a universal 10% tariff on US imports, we wouldn’t expect widespread reshoring of manufacturing production back to the US. And if it were accompanied by a 60% tariff on Chinese imports, the main beneficiaries would be other …
14th January 2025
Broad credit growth rebounds despite weak private demand Broad credit growth rebounded last month, but bank loan growth continued to hit record lows . We expect robust government bond issuance to continue supporting credit growth over the coming quarters. …
Exports to remain strong until Trump tariffs hit Export growth rebounded last month, with both export values and volumes posting double-digit y/y gains. We expect shipments to remain strong in the coming months, as US importers continue to stockpile …
13th January 2025
PBOC will retreat if tariffs are imposed Shortly after Trump’s election victory, the PBOC began to hold the daily fixing rate steady at 7.19/$, thereby keeping the weak edge of the currency’s trading band at 7.33/$ and suggesting to us that it was …
10th January 2025
Uptick in underlying inflation consistent with demand recovery Headline CPI inflation fell last month but this was driven by weather-related volatility in food prices. More important is that core CPI and PPI both picked up, adding to signs that policy …
9th January 2025
The Cold War was defined by geopolitical blocs – the Soviet or Eastern bloc against the Western bloc. Geopolitics retreated with the collapse of the Soviet Union. The period from the early-1990s to the early-2010s was instead an era of globalisation: most …
7th January 2025
Donald Trump’s second term could redraw the global geopolitical map. A sustainable “Grand Bargain” with China, warmer relations with Russia, or a breakdown in the relationship between the US and its traditional allies could each reshape supply chains and …
Our China Activity Proxy suggests that activity growth slowed in November. That was partly driven by a slowdown in fiscal support, reflected in weaker services activity in particular. But industrial activity also slowed on the back of weakening exports. …
31st December 2024
Non-manufacturing sector recovers strongly This report was first published on the 31 st December covering the official PMIs. We added commentary on the Caixin manufacturing PMI on 2 nd January and the Caixin services and composite PMIs on 6 th January. …
Markets don’t believe easing will deliver China’s central bank is trapped between the leadership’s incompatible desires to ramp-up monetary support for the economy, while keeping the currency stable and at the same time sending a message that its policy …
20th December 2024
The economy should post decent growth in Q4 off the back of more forceful fiscal support. The leadership signalled following the recent Central Economic Work Conference that policy will be loosened next year which should continue to prop up activity. But …
19th December 2024
Given the deterioration in the outlook for Chinese equities and the prospect of a markedly weaker renminbi, China’s demand for gold in 2025 will be stronger than we had previously expected. In turn, this will help offset the downward pressure on gold …
17th December 2024
Overview – China’s leadership has signalled that policy will be loosened further, which will provide a near-term prop to activity. But we still expect China’s growth to slow next year, because of the more challenging external environment and a further …
An unexpected loss of momentum China’s economy appears to have slowed last month, despite tailwinds from recent policy easing. Growth still looks on course to pick up this quarter, but the disappointing November data underscores the challenge policymakers …
16th December 2024
Monetary easing still struggling to put a floor under borrowing Broad credit growth stabilised last month, after hitting a 21-year low in October. But bank loan growth continued to slide to fresh lows, despite lending rates on new loans having been …
13th December 2024
B ut a dramatic shift in policy approach still unlikely The Central Economic Work Conference (CEWC), an annual gathering at which China’s leadership discusses targets and priorities for the following year, concluded yesterday. We discussed the key …
Note: When this Update was first published, China's state media had relayed the content of the CEWC readout but the readout itself had not been published. The Update has now been updated to reflect the contents of the readout that was published late on …
12th December 2024
Export volumes have further to rise, despite tariff threat Export growth slowed sharply last month but we doubt this signals the end of China’s recent export boom. We expect exports to accelerate again in the coming months, supported by gains in …
10th December 2024
Leadership alters formal characterisation of monetary policy The Politburo has just concluded its December meeting, which focuses foremost on economic affairs. After 14 years of monetary policy being officially characterised as “prudent”, the meeting …
9th December 2024
This page has been updated with additional analysis since first publication. Stimulus is propping up inflation Headline CPI inflation fell but this was mainly driven by easing upward pressure on food prices. Core inflation edged up and PPI deflation …
New rules are more restrictive but leave loopholes The updated US semiconductor export controls published on Monday will further limit China’s ability to manufacture advanced semiconductor chips. The 200+ pages of legislation contain many intricacies, but …
6th December 2024
This report was first published on the 2 nd December covering the official PMIs and the Caixin manufacturing PMI. We added commentary on the Caixin services and composite PMIs on the 4 th December. Growth continues to pick up, led by manufacturing The …
2nd December 2024
China Chart Pack (Nov. 24) …
29th November 2024
We held an online session on US import tariffs on 26th November. (See a recording here ). In this Update we answer the questions we were most asked. What are Trump’s motives for threatening tariffs and will he follow through? Trump has spoken about using …
