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Our China Activity Proxy (CAP) suggests that growth edged up in December driven by strong construction activity. But with credit now growing at the slowest pace in more than a decade and the impact of the government’s property controls yet to be fully …
28th January 2019
On paper, China’s rebalancing is going swimmingly, with the consumption share of GDP growth jumping last year to its highest level in almost two decades. But this is hard to square with broader data showing weaker consumer spending. One drag has been a …
25th January 2019
China’s working age population is currently falling by around 0.2% per year and in 2018 employment contracted for the first time in the reform era. These developments aren’t a surprise but the demographic outlook does appear to be deteriorating faster …
23rd January 2019
The detailed breakdown of China’s Q4 GDP data released today points toward softer service sector activity last quarter on the back of slower property sales and weaker consumer spending. We expect services growth to come under further pressure this year, …
22nd January 2019
Growth edged down last quarter, with the slowdown on the official GDP figures corroborated by other data. Conditions improved somewhat in December, but we expect the uptick in industrial output and consumer spending to prove short-lived. … GDP (Q4), …
21st January 2019
The liquidity injection by the PBOC this week was the largest on record. But it was mainly intended to manage the usual cash crunch ahead of Chinese New Year rather than loosen monetary conditions. The main constraint on further easing at the moment is …
18th January 2019
Officials have stepped up policy support in response to faltering domestic momentum. But with credit now growing at the weakest pace in more than a decade, the economy will not stabilise until at least the middle of this year. … Stimulus won’t prevent …
Policymakers have been making a coordinated effort today to provide reassurance that more stimulus is in the pipeline. But today’s data showing growth of outstanding credit still at its slowest pace in more than a decade suggests that the economy won’t …
15th January 2019
Export growth dropped more than anticipated in December as global growth softened and the drag from US tariffs intensified. Import growth also fell sharply in the face of cooling domestic demand. We expect both to remain weak in the coming quarters. … …
14th January 2019
The economic targets for 2019 that have been leaked this week signal official acknowledgement that China’s growth is slowing. Nonetheless, the low target for the fiscal deficit suggests that policymakers are still reluctant to launch major stimulus. A …
11th January 2019
With property sales slowing and monetary conditions likely to remain tight over the coming year, there are growing concerns about a possible slump in home prices in Hong Kong. We expect prices to fall by a third over the next five years, which will create …
10th January 2019
Following the drop back in oil prices, consumer price inflation returned below 2% last month. Meanwhile, producer prices are now on the brink of returning to deflation territory. Slowing inflation is the latest sign of cooling domestic demand and leaves …
The People’s Bank (PBOC) appears to have sold only a small amount of foreign exchange last month, suggesting that the renminbi has faced little downward pressure recently. … FX Reserves …
7th January 2019
In keeping with its usual practice of making policy moves late on Fridays, the PBOC today announced a 100bp cut to the required reserve ratio aimed at supporting the economy and managing liquidity ahead of Chinese New Year. With economic activity likely …
4th January 2019
Today’s cut to the required reserve ratio is partly about managing liquidity ahead of Chinese New Year. But it is also intended to provide support to the economy and will be reinforced with further easing soon. Given the pressures the economy is facing …
Our China Activity Proxy (CAP) points to a slowdown to near 5% growth in November. The government Economic Work Conference just concluded with a pledge to increase fiscal support and hints that monetary policy will be loosened further too. But it will …
21st December 2018
Xi Jinping used the 40 th anniversary of the start of China’s economic reforms to set out a narrative which placed state and, in particular, Party control at the heart of China’s subsequent economic successes. A stronger argument, in our view, is that …
Hopes that President Xi would use his speech today on the 40th anniversary of the start of China’s “Reform and Opening Up” to announce a renewed push for market-based reforms were disappointed. Rather than signalling renewed economic liberalisation, the …
18th December 2018
China’s economic slowdown looks set to deepen next year, weighing on equity prices and the renminbi. Policy stimulus should put a floor beneath growth before the year is out but won’t drive a strong recovery. … What to expect in …
17th December 2018
China resumed purchases of US soybeans this week and pledged to cut auto tariffs. But to clinch a lasting trade deal, it will need to convince the US that it is moving ahead with long-promised structural reforms. There are some signs that a renewed reform …
14th December 2018
Investment and consumption both appear to have cooled last month, with softer foreign demand also weighing on industrial production. We think further weakness is on the horizon. … Activity & Spending …
Growth in broad credit weakened further in November, suggesting that policymakers will need to increase support over the coming months in order to stabilise economic growth. … Bank Lending & Broad Credit …
11th December 2018
Export growth slowed last month but this reflects unflattering base effects and softer global growth rather than US tariffs. A bigger concern is the sharp drop in import growth which, coupled with cooling factory gate inflation, suggests that policy …
10th December 2018
Speculation that the People’s Bank (PBOC) stepped up intervention last month to stabilise the exchange rate doesn’t appear to be borne out by the data on its FX reserves. … FX Reserves …
7th December 2018
The arrest of Huawei’s CFO and recent Trump tweets boasting that he is “Tariff Man” have sparked concerns about the durability of the US-China trade truce. But there are still some grounds for optimism. The Chinese government has now clarified its …
China’s property sector is crucial to the economy’s performance and to China’s demand for many materials. In this updated and expanded Handbook, we discuss the drivers of the property cycle and answer key questions on affordability, over-investment, …
4th December 2018
The ceasefire agreed by Trump and Xi will help avert a sharp slowdown in US-China trade at the start of next year. But negotiations toward a lasting deal are likely to be fraught. And broader headwinds mean that China’s economy still looks set to slow …
3rd December 2018
The latest survey data suggest that conditions in industry remained broadly stable last month. But we still think that growth will slow during the next few quarters, even though the immediate threat of additional US tariffs has receded. … Caixin …
On the eve of the Xi-Trump showdown the latest data show that exports from China to the US of the goods affected by the first round of tariffs have fallen. But there is no sign that other countries are benefitting from diverted US demand. One possible …
30th November 2018
Downbeat official PMI readings for November suggest that growth remains under pressure, with signs that the recent uptick in construction activity is fizzling out as local governments pare back spending. … Official PMIs …
The trade war has so far resulted in a much sharper slowdown in China’s imports from the US than its exports to the US. But exports will weaken soon unless existing tariffs are rolled back. As things stand, the US has imposed tariffs of 25% on $50bn of …
28th November 2018
Expectations are low that Presidents Xi and Trump will resolve their differences at the G20 summit, but a temporary truce that puts on hold the planned US tariff hike in January is possible. In this Weekly we consider how the outcome of the meeting could …
23rd November 2018
Our China Activity Proxy (CAP) suggests that growth held up fairly well in October, supported by robust construction activity. But with a property demand weak and signs that developers are becoming more cautious, we expect growth to slow again before …
22nd November 2018
The spread of African swine fever (ASF) to China’s leading pig-rearing province (Sichuan) last week is an alarming development. But despite its rapid expansion across the country (the disease has spread to 18 of China’s 31 provinces in three months), the …
20th November 2018
The recent strength of direct investment into China is a reminder that, despite rising US tariff barriers, the country remains an attractive destination for foreign firms. Even so, policymakers shouldn’t get complacent. China will start to lose its allure …
16th November 2018
Hong Kong’s GDP growth slowed in Q3 to a two-year low in year-on-year terms, a trend we think will continue over the quarters ahead as headwinds from tightening monetary conditions and rising global protectionism build. … Hong Kong GDP …
The October activity and spending data were mostly better than anticipated. But despite an uptick in industrial output and investment, we doubt that economic growth has bottomed out just yet. … Activity & Spending …
14th November 2018
The pace of borrowing hit fresh lows in October, after a push by local governments to shore up infrastructure spending failed to have a lasting impact. Policymakers will therefore need to take further action in order to put a floor beneath economic …
13th November 2018
A closer look at the trade data for October bolsters our suspicions that firms have been frontloading shipments from China to the US. Meanwhile, President Xi opened this week’s import expo with an unambitious target for imports over the next 30 years. … …
9th November 2018
Headline consumer price inflation remained elevated in October. But with core inflation subdued and producer price inflation easing, we doubt policymakers will be too concerned. … Consumer & Producer Prices …
Chinese export growth picked up slightly last month, with no sign yet that US tariffs have had a major negative impact. Import growth also picked up, driven largely by growth in underlying volumes. … Trade …
8th November 2018
The PBOC appears to have intervened directly in the foreign exchange market again in October. But its intervention remains small in scale and seems calibrated to slow the renminbi’s fall rather than stop it. … FX Reserves …
7th November 2018
The Politburo statement this week gave a clear signal that further policy support for China’s economy is on the way. But with headwinds building, we don’t expect to see clear signs of economic stabilisation for some time yet. That statement, plus the …
2nd November 2018
The latest survey data, while not as bad as some feared, still paint a fairly downbeat picture. We expect the economy to weaken further in the coming months, triggering additional policy easing. … Caixin Manufacturing PMI …
1st November 2018
Downbeat official PMI readings for October suggest that while policy support is having some effect on construction activity, it has yet to fully offset broader downward pressure on the rest of the economy. … Official PMIs …
31st October 2018
The People’s Bank (PBOC) appears to have stepped up intervention recently to support the renminbi as it has approached 7.0 to the US dollar. Many are talking about that line as a psychological threshold that would trigger capital outflows if breached. We …
29th October 2018
Our China Activity Proxy (CAP) suggests that growth edged down last month and shows a more pronounced slowdown over the past year than the official GDP figures. We anticipate further weakness ahead as US tariffs bite and the cooling property market …
Policymakers are worrying about the widespread use in China of shares as collateral for lending – for good reason. But the remedies announced this week are unlikely to make much of a difference as long as share prices continue to fall. Meanwhile Xi …
26th October 2018
It comes as no surprise that Chinese officials are responding to slower growth by easing fiscal policy. But an increased focus on tax cuts and the lack of a revival in off-budget borrowing suggests that they are trying to do so in a way that avoids …
23rd October 2018
The PBOC has been hiding its efforts to support the renminbi over recent months. But a release this week showed the clear hand of the central bank: the PBOC’s balance sheet for September reveals the first sizeable sales of foreign exchange since the start …
19th October 2018
