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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
Economic growth in Hong Kong has cooled in recent quarters, and we think this trend will continue over the coming months. Domestic monetary conditions are likely to tighten sharply this year, while exports look set to weaken even if trade tensions between …
9th April 2018
If the USTR follows through on Trump’s request to add an additional $100bn worth of Chinese imports to the proposed US tariff list, the Chinese will be reluctant to capitulate and seem likely to respond by expanding their own tariff list. In this case, …
6th April 2018
We think consumer price inflation will have risen further last month to a fresh multi-year high, boosted by a rise in food price inflation. This probably marks the peak for inflation this year, though the threat of a trade war with the US has increased …
5th April 2018
China’s rapid and aggressive response to the proposed US tariffs has raised the stakes for both sides. But its move to publish a list of counter-tariffs is primarily intended as a deterrent and we think there is still time to de-escalate trade tensions …
4th April 2018
The unofficial PMI declined last month even as the official index rose. This suggests that while the recent easing of pollution controls has led to a rebound in heavy industry, broader economic activity may not have picked up much as a result. … Caixin …
2nd April 2018
Chinese financial markets have defied global trends recently. Looser monetary conditions have pulled down the country’s bond yields since the start of the year while yields abroad were rising until recently. And amidst a global sell-off of IT stocks, …
29th March 2018
China’s low-key response to last week’s tariff announcement by President Trump reflects in part a desire not to exacerbate tensions further. But Chinese officials will also be aware that, while they have a number of options for retaliation, restrictions …
28th March 2018
The tariffs announced today will cause difficulties for some firms exporting from China but will have a barely perceptible impact on China’s wider economy . The key uncertainty now is whether President Trump sees the them as an end in themselves, or …
22nd March 2018
For the second time since December, the People’s Bank has responded to a Fed rate hike by raising the rates it charges when providing funds in China’s interbank market. But contrary to perceptions, it is actually loosening monetary conditions at the same …
Our China Activity Proxy (CAP) suggests that growth has stabilised recently after a sharp slowdown since the middle of 2017. Economic conditions may improve in the near term as the government’s pollution crackdown is relaxed. But the resulting pick-up in …
Capital outflows edged up slightly in February in seasonally-adjusted terms, though they remain low. The PBOC again refrained from directly intervening in FX markets last month. But with the economy likely to slow this year and trade tensions rising, the …
21st March 2018
After 15 years at the helm of the People’s Bank, Zhou Xiaochuan is passing the title of governor to his protégé Yi Gang, a technocrat with two decades of experience at the central bank. Yi has been a strong proponent of Zhou’s efforts to tackle financial …
19th March 2018
The trade sanctions announced so far this year by the Trump administration on solar panels, washing machines, steel and aluminium have been inconsequential from China’s perspective: the US last year imported only around $6bn worth of these products from …
14th March 2018
Today’s data are broadly upbeat and suggest that the Chinese economy had a strong start to the year. But we expect growth to begin slowing again in the months ahead as the one-off boost to output from paring back pollution controls fades. … Activity & …
A sweeping overhaul of the structure of China’s government unveiled at the National People’s Congress today could improve financial regulation, reduce red tape for business, and boost productivity in agriculture, if implemented well. But the changes also …
13th March 2018
The amount of new loans issued by Chinese banks fell sharply last month. But this happens in February of almost every year. More important is that broader credit growth is now at multi-year lows. … Bank Lending & Broad Credit …
9th March 2018
Consumer price inflation rose sharply last month after a fall in January, boosted by a New Year-driven rebound in food price inflation. We think a further rise in food inflation will keep the headline rate elevated over the next few months. In contrast, …
The Hong Kong dollar has weakened this week to historic lows, though remaining within the narrow confines of its currency peg. But this is the result of ample domestic liquidity which has kept local interest rates low as those abroad have risen, and isn’t …
8th March 2018
The surge in export growth last month largely reflects the shifting timing of Chinese New Year. Of greater significance given the current climate of concern over US protectionism, China’s surplus with the US continues to increase. … Trade …
The resignation of Gary Cohn, reportedly one of the strongest proponents of free-trade policies within the Trump administration, has raised fears that US trade policy may now turn sharply towards protectionism. China would want to avoid a trade war with …
7th March 2018
China’s foreign exchange reserve figures suggest that the People’s Bank remained a minor player in the FX market last month. But its pledge to allow a more market-driven exchange rate will be tested if the renminbi comes under renewed pressure due to …
Following a fall in January, consumer price inflation will probably have jumped last month to a one-year high. We expect a further rise in food price inflation to keep the headline rate elevated over the next few months. But with the core rate broadly …
6th March 2018
China’s retention of an “about 6.5%” growth target for GDP in 2018, while expected, undermines the argument that growth is being demoted as a central policy concern. Growth is likely to slow we believe, not least because the finance ministry is today …
5th March 2018
China’s property sector has had a good couple of years and this has resulted in higher valuations for listed real estate developers. But the recent strength of land sales points, we think, to unrealistic expectations of likely demand in the years ahead. …
2nd March 2018
The survey data don’t offer a clear signal on the strength of factory activity last month. The Caixin manufacturing PMI was largely unchanged but the official index dropped sharply. The former is generally the more reliable guide to cyclical trends. But …
1st March 2018
Chinese stock markets have edged up recently following a slump in early February, likely supported by state buying. Meanwhile, the Hong Kong dollar has weakened against the US dollar and may soon run into the buffers of the HKMA’s exchange rate band. … …
28th February 2018
Hong Kong’s economy ended last year on a fairly strong note, supported by buoyant exports. But we think growth will slow over the quarters ahead. The expansionary budget unveiled today will provide some support to the economy this year. But it is unlikely …
A sharp decline in the official manufacturing PMI this month suggests that the survey data may finally be responding to the slowdown in growth shown on our China Activity Proxy late last year. And although a recovery looks possible in the short-run as the …
Our estimates show that outflow pressures eased at the start of this year after picking up in the fourth quarter. Foreign investors acquired Chinese financial assets at a more rapid pace last month while global firms stepped up their long-term investments …
27th February 2018
The removal of the two-term limit on China’s president is the clearest sign yet that Xi Jinping is reversing China’s reform era shift toward more institutionalised and rule-based politics. The quality of economic policy making is likely to suffer as a …
26th February 2018
One recent headwind to economic growth has been the government’s winter pollution crackdown in northern China, which has triggered numerous factory closures. This has had the desired impact of improving air quality but at the cost of limiting industrial …
14th February 2018
Chinese banks issued a record amount of new loans last month. But that happens at the start of almost every year. While the eye-popping new loan numbers will grab the headlines, the more important story is that broader credit growth has fallen to a new …
12th February 2018
The latest drop in consumer price inflation is largely seasonal and should reverse this month. The same cannot be said for the decline in producer price inflation, which points to a further easing in underlying price pressures. … Consumer & Producer …
9th February 2018
Today’s sharp move in the renminbi underlines the extent to which policymakers are keen to prevent the emergence of strong speculative pressures on the currency. … Policymakers pushing back on …
8th February 2018
Trade growth at the start of 2018 beat expectations by a wide margin. But seasonal volatility means that we won’t get a clear reading on the pace of shipments in and out of China until next month. … Trade …
China’s foreign exchange reserves data suggest that the People’s Bank has not been directly intervening to limit the renminbi’s recent gains against the dollar. That partly reflects the fact that the renminbi has strengthened much less against other …
7th February 2018
The usual pattern around Chinese New Year is for inflation to rise sharply either in January or February and fall in the other month. This year, we think inflation will have picked up in both. And rising food price inflation will probably keep the …
6th February 2018
The survey data suggest that output growth held steady at the start of 2018, with disruptions from the anti-pollution campaign starting to ease. But signs in the data of a slight softening in demand provide hints of what’s to come. … Caixin Manufacturing …
1st February 2018
The renminbi has now reversed all of its losses against the dollar since the day of the botched exchange rate reform in August 2015. We remain upbeat about the currency’s medium-term prospects but suspect that it is nearing a high-water mark for the time …
31st January 2018
While the survey data have yet to fully reflect the slowdown in growth shown on our China Activity Proxy, the latest decline in the official PMI does add weight to the view that the economy is cooling. … Official PMIs …
