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We think headline inflation will have risen in June to a five-month high on the back of a further rebound in food price inflation. Looking ahead, while we don’t expect consumer price inflation to rise further in the coming months, heavy flooding across …
6th July 2017
China’s stimulus-driven recovery is over. Key risks, in particular around the currency, have dissipated, so the coming slowdown should be mild. But the economy’s structural problems are not being addressed. Prospects for growth further ahead are therefore …
3rd July 2017
The Bond Connect scheme launched today creates a new channel for foreigners to invest in China’s onshore bond market. If previous steps to expand market access are any guide, however, the move will do little to boost inflows. These are being held back by …
Today’s PMI reading suggests that growth in China may have edged up at the end of Q2. Nonetheless, it is still consistent with more subdued economic activity than during much of the past few quarters. Meanwhile, slowing credit growth and tighter monetary …
Chinese equities ended June at a two-month high, likely supported by state buying. Increased intervention by officials also appears to have been responsible for the renminbi’s recent appreciation against the US dollar. Meanwhile, monetary conditions …
30th June 2017
Efforts to curtail off-budget borrowing by local governments have recently helped slow the rise of China’s public debt ratio. But a further rise in government debt is almost certain in future as it eventually foots the bill for the still-rising bad debts …
The official manufacturing PMI continues to point to robust economic growth. But the data should be taken with a large pinch of salt given that the index has recently diverged with more reliable measures which suggest that momentum has eased. … Official …
Our China Activity Proxy (CAP) for May shows that growth edged up for the first time this year. This was due to a seasonal jump in passenger traffic around a national holiday. As officials continue their efforts to rein in credit risks, we think activity …
29th June 2017
1st July marks the 20th anniversary of Hong Kong’s return to China. The city’s economy has continued to prosper over the last two decades, defying gloomy predictions made by some before the handover. But politically the relationship between China and Hong …
23rd June 2017
Capital outflows from China were broadly unchanged last month and are likely to persist at this relatively low level for the foreseeable future as households and firms increase their exposure to foreign assets. But unless sentiment on the renminbi turns …
20th June 2017
MSCI will announce on Tuesday whether it will include China’s domestically-listed A-shares in its benchmark indices. It has chosen not to in the past on concerns over market access and official intervention. Another issue is the sheer size of China’s …
16th June 2017
The squeeze in bond markets explains a pick-up in corporate loan growth last month as firms sought cheaper forms of credit. But on broader measures, the recent slowdown in credit growth has been sustained. … Bank Lending & Broad Credit …
14th June 2017
Headline industrial production growth was stable last month but the output volumes of individual products hint at a continued deceleration in activity. Meanwhile, weaker inflation in capital goods prices is revealing the underlying weakness of investment. …
The US Fed is poised to raise rates on Wednesday. When it last hiked back in March, the People’s Bank quickly followed suit. This time, however, we expect the PBOC to stay on hold and, indeed, to keep rates stable for the next few quarters as China’s …
13th June 2017
Consumer price inflation edged up last month on the back of a less rapid drop in food prices. But declines in non-food inflation and producer price inflation still point to an easing of broader price pressures. … Consumer & Producer Prices …
9th June 2017
The latest Chinese trade data beat expectations. Imports, in particular, held up surprisingly well. But given the approaching headwinds to the economy from policy tightening, we doubt this strength will last. … Trade …
8th June 2017
The latest rise in China’s foreign exchange reserves suggests that the People’s Bank (PBOC) became net buyer of FX for the first time in well over a year last month. This reflects an easing of capital outflows, which has allowed the PBOC to pare back …
7th June 2017
We think headline inflation will have risen in May to a four-month high, driven by a further recovery in food price inflation. But looking ahead, CPI inflation is unlikely to rise much further this year. Food inflation should continue to edge up over the …
6th June 2017
The outlook for China’s banks is going from bad to worse. Pressure on the banking system has increased during the past year even though economic activity has recovered. And with a renewed slowdown now on the cards, the health of China’s banks looks set to …
1st June 2017
Yesterday’s official PMI reading had hinted at growth having remained broadly stable last month. But today’s downbeat unofficial PMI suggests conditions may not have held up as well as previously thought. … Caixin Manufacturing PMI …
China’s markets were left unfazed by the ratings downgrade last week. But there have been some sizeable gains since then in the renminbi as policymakers have signalled their determination to prevent the currency from weakening. We have tweaked our …
31st May 2017
The latest official PMI readings add to broader evidence that downward pressure on growth has eased lately. We expect this stability to prove short-lived. … Official PMIs …
The change in the renminbi fixing mechanism announced today shouldn’t rattle markets, not least because it appears to be an attempt to strengthen rather than weaken the currency. It suggests though that policymakers’ tolerance for letting market forces …
26th May 2017
The ongoing regulatory crackdown on banks’ off-balance-sheet activities has contributed to the mild slowdown in growth we’ve seen recently. But it is also bringing into focus the challenges that China’s policymakers face in putting credit growth onto a …
25th May 2017
Today’s ratings downgrade reveals little that investors didn’t already know about credit growth in China and the risk that it requires the government to accept a big increase in its debt load in future. The greater concern though, we believe, should be …
24th May 2017
Our China Activity Proxy (CAP) shows growth stayed in April at the slowest pace in half a year. Looking ahead, as officials continue their efforts to rein in credit risks, we think activity will slow further in the quarters ahead. … Growth remains at …
After a sharp decline at the start of the year, net capital outflows have crept up again recently. Unless we witness another misstep on exchange rate policy though, outflow pressure should remain manageable. … Capital Flows Monitor …
23rd May 2017
Regulators this week approved a scheme that will allow investors with brokerage accounts in Hong Kong to invest directly in mainland bond markets, set to be launched before the end of this year. But while the announcement has drawn attention to China’s …
17th May 2017
The weak activity and spending data published yesterday add to evidence that growth in China is starting to slow. We think the deceleration in the economy will be gradual and expect official efforts to contain credit risks to continue in the months ahead. …
16th May 2017
The activity and spending data for April all came in below consensus, continuing the recent trend of disappointing Chinese data. Softer foreign demand and domestic consumption were the immediate culprits, with infrastructure and property activity actually …
15th May 2017
The trade deal announced between the US and China today won’t make any meaningful difference to the bilateral trade imbalance, which could still trigger a flare-up of tensions between the two sides in the future. For now though, the Trump administration …
12th May 2017
The headline credit data for April were stronger than anticipated, with lending holding up relatively well in response to policy tightening. That said, our adjusted measure of broad credit still points to a further slowdown in economic activity ahead. … …
Hong Kong’s economy expanded in Q1 at the fastest pace in five years in y/y terms, boosted by strong growth in exports and investment. But this is likely to be as good as it will get. While external demand should remain buoyant, the rapid growth in …
Consumer price inflation edged up last month but broad price pressures still appear fairly subdued. Meanwhile, the rapid rise in producer price inflation since late last year is now reversing, thanks in part to the recent declines in commodity prices. … …
10th May 2017
We think headline inflation will have risen in April and expect a further pick-up over the next few months. But price pressures should remain contained over the course of this year. Meanwhile, the sharp rebound in producer prices over the past year has …
8th May 2017
Chinese trade is still growing rapidly but shipments are beginning to slow, with cooling domestic demand weighing on imports. Meanwhile, capital outflows are edging up again despite the recent rise in headline FX reserves. … Trade & FX Reserves …
Growing evidence that China’s economy is slowing has triggered falls in domestic equity and global commodity markets this week but there has been no repeat of the broad global sell-off that accompanied worries about China in the recent past. This is a …
5th May 2017
The latest PMI readings support our view that growth in China peaked at the turn of the year and is now decelerating. … PMIs (Apr.) …
2nd May 2017
China’s equity markets saw the biggest fall since 2016 in April after policymakers ramped up their rhetoric on limiting financial risks. Meanwhile, the renminbi has remained stable against the US dollar in recent weeks, but we don’t expect this to last. … …
28th April 2017
After falling for years, construction growth in China has stabilised since the start of 2016, supported by a rise in home sales. Dire warnings of developers collapsing have not materialised. But it is too early to sound the all-clear. … Construction …
27th April 2017
Analysts are convinced that the renminbi can only go one way – down against the dollar. But a return to appreciation is looking increasingly plausible. … Renminbi may be approaching a turning …
26th April 2017
Our China Activity Proxy (CAP) suggests that growth softened slightly at the end of Q1. There are good reasons to think that this foreshadows a broader slowdown in the economy in coming quarters. … Early signs that growth is edging …
24th April 2017
According to our latest detailed estimates, China’s net capital outflows have been close to zero during the past two months. This is a major shift from late last year when monthly outflows exceeded $70bn, and it has allowed the PBOC to start rolling back …
21st April 2017
Household borrowing has soared over recent months, largely in the form of mortgages. But this boom is probably nearing an end. Restrictions on property purchases have been reintroduced in many cities as economic jitters have faded and concerns about price …
20th April 2017
Nominal investment growth accelerated in Q1, leading to increased optimism over this year’s economic outlook. But adjusting the data for the jump in fixed asset price inflation suggests that underlying investment demand may actually have weakened last …
18th April 2017
Growth edged up last quarter according to the official GDP figures. Our own measure of economic activity also points to a strong start to 2017, though we don’t expect the strength to be sustained. … GDP (Q1) & Activity & Spending …
17th April 2017
The latest trade data point to buoyant external demand but suggest that domestic demand may have started to cool. … Trade (Mar.) …
13th April 2017
Hong Kong’s economy has rebounded over the past year and is likely to stay strong in the near-term, supported by rapid export growth, and we have raised our forecast for 2017. But we expect a fresh property downturn and weaker economic growth in mainland …
12th April 2017
Consumer price inflation remained tepid last month, suggesting that there was more to the drop in February than just seasonal factors. Producer price inflation remains rapid but has begun to come off the boil. … Consumer & Producer Prices …
China’s foreign exchange reserves were broadly stable last month, suggesting that the recent easing of capital outflows has allowed the People’s Bank to step back from FX intervention. … FX reserves …
7th April 2017
