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Chinese policymakers are intervening to stem market declines, but unevenly: they appear much more concerned about the currency than about equities. Meanwhile, worries about the domestic outlook continue to mount in parallel with those over trade. A surge …
6th July 2018
The latest PMI readings suggest that the economy lost some momentum last month. With credit growth still cooling and US tariffs imminent, we expect further weakness ahead. … PMIs …
2nd July 2018
A promise of support from the People’s Bank helped stem the slide in both the renminbi and Shanghai equities today. If declines resume next week, we would expect more forceful intervention to support both markets. Meanwhile, it has been a bad week for …
29th June 2018
The latest escalation of US threats against China has triggered a slide in the renminbi. The People’s Bank appears to have done little to resist the move so far, but it will remain wary that sustained falls could trigger another bout of capital outflows. …
26th June 2018
Worries about China’s economic outlook have increased recently. But our China Activity Proxy (CAP) suggests that growth strengthened in May to the strongest rate so far this year. … CAP eases growth …
25th June 2018
Yesterday’s required reserve ratio (RRR) cut is officially intended to support banks’ debt-to-equity swaps rather than mark a shift away from deleveraging and toward monetary easing. But in practice, the RRR cut does seem likely to result in looser …
Escalating trade tensions with the US have led the news abroad, but in China much of the focus over the past week has been on the outlook for the domestic economy and policy. An RRR cut appears imminent and more concerted policy efforts to support the …
22nd June 2018
Against a backdrop of rising trade tensions with the US and jitters about the wider outlook for emerging economies, capital flows in and out of China have been broadly balanced. Global investors still appear to be fairly optimistic about the prospects for …
21st June 2018
If President Trump follows through on his threat to expand further the range of Chinese goods subjectto punitive tariffs, China is likely to respond quickly by targeting US firms operating in China. This couldbe highly damaging for many of those companies …
19th June 2018
A trade spat with the US is one of a number of headwinds facing China’s economy over the coming year. They point to a slowdown not a slump. But the outlook further ahead is no better. Policymakers’ reluctance to allow market forces to determine economic …
15th June 2018
There have been clearer signs recently that China’s economy is slowing. We expect headwinds to economic growth to continue to build over the coming months and that this will prompt the People’s Bank to loosen policy in the second half of the year. … …
14th June 2018
Today’s activity data were a mixed bag as industrial production and real estate activity picked up but retail sales and investment spending cooled last month. We think that activity will slow over the rest of 2018 as headwinds from slower credit growth …
The value of new loans issued by Chinese banks edged down last month. But this often happens in May. More importantly, broad credit growth slowed further and is now the weakest in over a decade. … Bank Lending & Broad Credit …
12th June 2018
Import growth was surprisingly strong last month. This probably reflects a continued recovery in industrial activity following the easing of winter pollution controls and is unlikely to be sustained. Meanwhile, with global growth now past its peak, …
8th June 2018
The latest foreign exchange reserves data are consistent with very little PBOC action in the FX markets. This suggests that the recent resilience of the renminbi relative to other EM currencies reflects confidence in China’s economy and ability to manage …
7th June 2018
Rising global oil prices will put upward pressure on Chinese inflation over the next few months. But with food and core inflation both likely to edge down, we expect headline consumer price inflation to stay broadly stable over the rest of this year. … …
6th June 2018
China has reportedly fleshed out its offer to boost imports from the US. In return, the US is working on a deal to allow ZTE to resume operations and may call off the planned tariffs on Chinese goods. None of this will do much to narrow the bilateral …
The latest PMIs suggest that China continued to sustain rapid growth last month. But the surveys don’t tell the full story and have mostly defied a slowdown in the hard data during the past year. … Caixin Manufacturing PMI …
1st June 2018
The renminbi has weakened a little against the US dollar in recent weeks. But the Chinese currency has continued to appreciate in trade-weighted terms. Meanwhile, the Hong Kong dollar has bounced along the weak side of its trading band, triggering further …
31st May 2018
Today’s strong set of official PMIs tell a reassuring story about current growth momentum and suggest that April’s recovery may have extended into May. However, we will have to wait for more reliable indicators to be published in order to get a clearer …
Real estate investment has recently returned to double digit growth. But a closer look at the data reveals that this recovery has been entirely driven by a jump in developers’ land purchases, which is unlikely to be sustained. In contrast, developers’ …
29th May 2018
Our China Activity Proxy (CAP) suggests that economic growth accelerated in April to a seven-month high as the government’s winter pollution crackdown ended. We think this mini rebound has now run its course and that growth will stabilise or, more likely, …
23rd May 2018
The State Council is reportedly mulling the removal of all remaining limits on the number of children that Chinese families can have. But the small impact of past steps to dismantle the one-child policy suggests that policymakers would need to take a much …
22nd May 2018
Rising US bond yields and trade tensions have dominated headlines over the past month. But there is no sign that either has had a big impact on flows of capital in or out of China. We estimate that net capital flows have been broadly balanced recently. … …
21st May 2018
With rising US bond yields putting EM currencies under pressure, the renminbi stands out as a beacon of stability. It has only edged down against the dollar and has continued strengthening in trade-weighted terms. This resilience – with capital flows also …
17th May 2018
MSCI today unveiled the full list of Chinese shares that will be added to its global indices starting next month. Inclusion is symbolically important for China’s leadership. But the impact on domestic equity markets and capital flows will be small. … MSCI …
15th May 2018
Industrial activity was buoyed last month by the easing of pollution controls. But there are signs in the rest of today’s data that the broader economy is losing momentum. … Activity & Spending …
China has had a stellar run during the past few decades, achieving sustained rates of growth only ever previously seen in a handful of emerging economies. Most major forecasters expect this outperformance to continue for the foreseeable future. By …
14th May 2018
The slowdown in broad credit growth that has been underway since mid-2016 moderated last month but a turnaround is unlikely for some time yet, meaning that weaker lending will remain a headwind to growth throughout the rest of this year. … Bank Lending & …
11th May 2018
Hong Kong’s economy expanded last quarter at the fastest pace in nearly seven years. We think GDP growth has now peaked though and will slow over the coming months as headwinds from tightening monetary conditions build. The city’s overheated property …
Today’s inflation data point to easing price pressures, consistent with our view that both consumer and producer price inflation are already past their peaks for the current economic cycle. … Consumer & Producer Prices …
10th May 2018
The latest trade data suggest that domestic demand is holding up fairly well. In contrast, despite a seasonal uptick in export growth, foreign demand for Chinese goods appears to have softened, with the prospect of possible US tariffs weighing on the …
8th May 2018
China’s foreign exchange reserves continue to point to very little PBOC action in the FX markets, with muted capital outflows opening the door to renewed efforts to liberalise the capital account. … FX Reserves …
7th May 2018
Demands made by the US going into this week’s trade negotiations with China were unrealistically high and an agreement today was never likely. Indeed, unless the Trump administration settles for a lot less than initially demanded, tensions between the two …
4th May 2018
Consumer price inflation will probably have edged down further in April following a spike in February that took the headline rate to the highest since 2013. We think inflation will be broadly stable over the months ahead. Food inflation may pick up on the …
The stability of the Caixin PMI last month suggests there is little immediate cause for concern over the health of China’s economy. That said, we do expect growth to start slowing again before long. … Caixin Manufacturing PMI …
2nd May 2018
The official manufacturing PMI points to economic conditions having remained healthy in April. But with headwinds from the property sector and slower credit growth building, we don’t think this strength will last. … Official PMIs …
30th April 2018
China’s equity markets dropped this month to their lowest since 2016 as the US-China trade conflict escalated. Meanwhile, a jump in interbank interest rates may put pressure on the country’s bond yields in the near-term. But if we’re right that the PBOC …
27th April 2018
In aggregate, local government debt ratios have been fairly stable during the past few years and there has been a clear improvement in the composition of the debt. But the picture looks less rosy once we consider cyclical factors such as the temporary …
26th April 2018
Our China Activity Proxy (CAP) suggests that the easing of the government’s pollution crackdown contributed to a pick-up in economic growth last month. But the rebound will likely prove short-lived. … Growth edges up as pollution controls …
20th April 2018
A rise in US-China trade tensions has dominated headlines in recent weeks. But recent developments are not having any impact on cross-border capital flows. Our estimates suggest that flows in and out of China remain roughly balanced. … Capital Flows …
19th April 2018
Investor scepticism about much of China’s economic data is deep-rooted and the unemployment figures have long been considered among the worst of the lot. So the release this week of a new, survey-based unemployment measure could have been an important …
18th April 2018
The detailed breakdown of China’s Q1 GDP data released today suggests that although the IT sector has continued to boom, activity in the rest of the service sector has softened recently, offsetting a recovery in industry and construction. And while the …
Today required reserve ratio (RRR) cut doesn’t constitute broad monetary easing. But it does signal that – despite the recent strength of the official data – policymakers are starting to balance concerns about economic conditions alongside their …
17th April 2018
As expected, China’s GDP growth remained uncannily stable last quarter. In practice, growth is almost certainly slower than officials claim and looks to have edged down slightly last quarter. But the big picture is that economic momentum did hold up …
The HKMA’s sales of foreign exchange FX to support the Hong Kong dollar, which hit the weak end of its trading band this week for the first time since 2005, shows the exchange rate regime working as intended and isn’t a sign that the peg is under threat. …
13th April 2018
There was a seasonal pick-up in new lending last month but underlying growth in broad credit continued to slow and is now at its lowest rate in over a decade. Our China Activity Proxy suggests that this pullback in lending has already started to weigh on …
Lunar New Year effects continued to distort China’s headline trade figures last month. But looking through this seasonal volatility, shipments look to have remained healthy, serving as a reminder that, for now at least, the looming threat of a trade war …
Today’s softer-than-expected inflation data are consistent with our view that cooling price pressures will open the door to further monetary easing in the coming quarters. … Consumer & Producer Prices …
11th April 2018
In an attempt to de-escalate trade tensions, Xi has pledged to speed up efforts to reduce trade and investment barriers, boost competition and bolster intellectual property protections. This could provide Trump with an opportunity to back down from his …
10th April 2018
