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Commercial banks lowered the Loan Prime Rate (LPR) today in response to last week’s policy rate cut. With economic conditions still weak, we expect further rate declines in the coming months. The one-year rate fell from 4.05% to 3.85% (both the Bloomberg …
20th April 2020
GDP likely to remain below 2019 levels in Q2 The main event this week was the release of the Q1 GDP figures, which showed a 6.8% y/y fall in output, the first contraction since quarterly GDP figures were first published in 1992. We covered the data in …
17th April 2020
China faces slow recovery from first contraction on record GDP contracted in Q1 for the first time since China began publishing quarterly data in 1992, though we suspect that the slump in output was even deeper than officials claim. The monthly data …
Overview – After the deepest downturn since the Cultural Revolution in Q1, China’s economy will return to growth this quarter. But with labour market strains holding back domestic demand and external headwinds intensifying, output is still set to contract …
15th April 2020
The People’s Bank (PBOC) has taken yet another step to help banks and borrowers weather the ongoing economic weakness and is preparing to lower interest rates further in the coming months. The PBOC has just cut the one-year rate at which it lends to banks …
Worse still to come for exports Shipments picked up last month as factories re-opened and domestic demand began to recover. But with economic activity in the rest of the world now collapsing, the worst is still to come for China’s export sector. The …
14th April 2020
Q1 GDP to contract barring massive falsification The government will publish Q1 GDP figures next week in what will be an unprecedented test of its willingness to acknowledge economic weakness. There have been doubts about the GDP data for years. Most …
9th April 2020
An uneven recovery The first monthly data points for March are so far broadly consistent with what the daily indicators we track have been showing – that activity began to recover last month but remains weak. The PMIs were derided by some as implausibly …
3rd April 2020
The economic recovery underway in China gives some useful pointers to what lies ahead for the rest of the world. An initial increase in activity can happen rapidly once lockdown measures are eased. But this will soon run into constraints resulting from …
2nd April 2020
Activity improves but recovery to be slow The Caixin manufacturing PMI strengthened last month from February’s abysmal levels and suggests that the contraction in activity has already bottomed out. But weak foreign demand and labour market strains will …
1st April 2020
Past the worst but weakness to drag on The latest survey data add to broader evidence that activity has started to rebound but suggest that weak foreign demand and labour market strains remain headwinds. The official manufacturing PMI increased from 35.7 …
31st March 2020
The People’s Bank (PBOC) has taken another step to loosen monetary conditions by lowering the rate at which it lends to banks. But the central bank’s job isn’t done yet and we anticipate continued efforts to reduce bank funding costs in the coming months. …
30th March 2020
Pulling down the shutters China has continued its slow return to normality this week. Remaining restrictions on movement within the country are being relaxed. Residents of Hubei outside Wuhan are now free to travel; Wuhan’s lockdown will end in early …
27th March 2020
Activity across both industry and services is recovering as measures to contain the coronavirus have been eased. But the recovery is likely to run into the constraint of weak demand before long. The labour market is the biggest domestic concern. The …
On current trends the extreme shock to China’s economic output caused by official closing of workplaces and limits on movement will mostly have ended by mid-April. But firm closures and job losses, lingering nervousness among consumers, and the deepening …
24th March 2020
GDP target unachievable, more stimulus needed Officials in China are in the midst of reviewing the 2020 targets that were set (but not made public) during the Central Economic Work Conference in December. The new targets will be announced at the National …
20th March 2020
Commercial banks unexpectedly did not lower the Loan Prime Rate (LPR) today. Despite this, monetary conditions are still easing as the People’s Bank (PBOC) has been using a broad set of instruments to ensure that credit keeps flowing despite disruptions …
The latest data point to a 20% q/q contraction in GDP this quarter (-16% y/y), even on the official figures. Given the shock to incomes and employment, the continued concern about the threat of further infections within China, and the growing disruption …
18th March 2020
Weakest-on-record data point to a sharp contraction in Q1 The latest activity and spending data were much weaker than expected and point to a far deeper downturn than during the Global Financial Crisis. While domestic conditions should improve slowly in …
16th March 2020
The People’s Bank has taken another step to push down borrowing costs. China’s economy is still operating far below its normal capacity but, with only eight new infections reported nationally in the latest daily figures, the central government is now …
13th March 2020
PBOC may revive old policy tool Policymakers have signalled that further monetary loosening is imminent. The State Council is calling for cuts to banks’ required reserve ratio (RRR) and PBOC officials are dropping hints about a possible cut to benchmark …
Some countries have managed to control the new coronavirus without large-scale quarantines or economic shutdowns. But they have achieved this by preventing the virus from spreading within the community in the first place. The only places that have so far …
11th March 2020
Policy support keeps the credit taps on Credit growth was stable last month despite the slump in economic activity. In most countries, credit growth would slow sharply in response to a shock such as the coronavirus, as households defer large purchase and …
As the world’s largest oil importer, China stands to gain from the recent fall in oil prices. But the boost to growth will be modest and won’t make up for the hit to Chinese exports from weaker global demand. Oil prices have fallen 20% this week, bringing …
10th March 2020
A disinflationary shock The coronavirus outbreak is putting downward pressure on inflation. While supply chain disruptions have kept food prices high, weaker demand has weighed on the price of other goods and services. Consumer price inflation fell from …
Imports yet to reflect the slump in demand Exports dropped the most since 2008 at the start of this year. Imports held up better but at the expense of a jump in inventories. Inbound shipments will soon play catch-up with the slump in domestic demand. …
9th March 2020
Activity continues slow march back to normality Disruption from efforts to contain the coronavirus outbreak has continued to ease during the past week, with most of the daily indicators that we track on our coronavirus webpage pointing towards recovery. …
6th March 2020
China is easing monetary policy and lining up fiscal stimulus measures worth at least 2% of GDP. The impact will be muted as long as the workforce is still facing major disruption. But these measures should help restore output to a normal level in the …
5th March 2020
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
An unprecedented slump in activity The latest PMI readings were in line with our downbeat expectations but will come as a shock to most analysts, who had anticipated a much smaller hit to business activity from the coronavirus outbreak. Particularly …
Chinese factories were slow to reopen even after the extended Lunar New Year holiday came to end. One week after most of the country officially went back to work on 10 th February, more than half of large industrial firms remained closed. That has now …
28th February 2020
Foreign demand and global supply chains at risk The number of new COVID-19 cases in China continued to decline this week. But local officials still appear cautious about relaxing containment measures, for fear of being held responsible for a renewed …
With normal activity taking longer to recover than seemed likely earlier this month, we now think that China’s economy will contract outright in year-on-year terms this quarter, for the first time since at least the 1990s. The leadership appears to be …
26th February 2020
The 2020-2021 budget that the Hong Kong government announced earlier today is large in scale and should help offset the damage that the coronavirus outbreak is having on companies and consumers. But there is little the government can do to address the …
Half of the economy running at half speed While the number of new coronavirus cases has continued to trend down in the past week, the disruption to economic activity has persisted. There are some tentative signs of an uptick in property sales and …
21st February 2020
Fiscal stimulus helps offset coronavirus hit to credit demand Strong government bond issuance left growth in outstanding broad credit unchanged last month, though weaker corporate borrowing suggests that the uncertainty caused by the coronavirus was …
20th February 2020
Commercial banks cut the Loan Prime Rate (LPR) today in response to moves by the People's Bank earlier in the month to lower their funding costs. While more easing is likely in the coming weeks, this alone won’t change the fortunes of the millions of …
The vast majority of firms in China have enough funds to keep paying their creditors and employees for at least a couple of months amid the disruptions caused by the coronavirus outbreak. But a minority are already having to lay off workers and job losses …
19th February 2020
The People’s Bank (PBOC) has taken yet another step to help banks and borrowers weather the economic disruption from the coronavirus outbreak. But more easing will probably be needed. The PBOC has just cut the one-year rate at which it lends to banks via …
17th February 2020
Virus has pushed economy into extended slumber During the week-long holiday that follows Lunar New Year day (25 th Jan. this year) it’s common for much of the economy to slow or even grind to a halt as workplaces shut down and migrant workers return home. …
14th February 2020
A jump in reported cases and deaths appears to reflect the official figures getting a better grip on the true extent of past infections, rather than indicate a recent acceleration in the spread of the virus. If anything, the latest data continue to hint …
13th February 2020
China’s economy is likely to contract sharply in the first quarter, as a result of the measures that have been taken to limit the spread of the new coronavirus. The apparent slowdown in new infections in the last few days should raise hopes that output …
12th February 2020
Efforts to contain the virus are becoming less draconian but with many factories struggling to re-open and households not spending, it will be a while before the drag on growth fades. Reuters reported today that President Xi warned officials last week not …
11th February 2020
Inflation hits eight-year high Seasonal volatility and coronavirus disruptions pushed up consumer prices in January. But the PBOC is likely to look through this temporary rise in inflation when setting policy. Consumer price inflation increased from 4.5% …
10th February 2020
Some signs spread of virus may be slowing… China’s near-term economic outlook hinges on how long measures to contain the spread of the virus remain in place. We know that the hit to activity has been significant , though – as today’s delay of the release …
7th February 2020
PBOC leans against renminbi depreciation The PBOC doesn’t appear to have deployed its FX reserves last month to limit renminbi depreciation triggered by the coronavirus outbreak. But there are signs that it has intervened in other ways. The value of the …
Policymakers have loosened both monetary and fiscal policy in an effort to soften the economic blow from the coronavirus. Further easing is likely in the coming weeks. But if the virus peaks soon then activity may rebound quickly, with stimulus now coming …
6th February 2020
Data due in the next week or so should give a better sense of how badly economic activity has been hit by the outbreak. And given the incubation period of the virus, the effectiveness of the containment efforts will also start to become clearer, providing …
4th February 2020
Coronavirus to exacerbate ongoing recession Hong Kong’s economy continued to contract last quarter and the Coronavirus outbreak will probably keep the city in recession for a while longer. The city’s GDP contracted 0.4% q/q in Q4 in seasonally adjusted …
3rd February 2020
The People’s Bank has lowered the rates it charges banks for short-run liquidity. Given the mounting toll of the Coronavirus outbreak, we expect more cuts in the coming months. The People’s Bank (PBOC) has just cut its 7-day reverse repo to 2.40% from …
