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Although there has been a surge of speculation in the wake of China’s exchange rate move that Hong Kong could abandon its US dollar peg, we expect the peg to remain in place well into the next decade. … Little chance of a Hong Kong …
27th August 2015
After the drama of the past few days, our updated China Activity Proxy (CAP) tells a relatively reassuring story about the state of China’s economy. … No sign of crisis in latest activity …
26th August 2015
With the government’s efforts to prop up equity prices through direct purchases in tatters, policymakers have changed tack with a simultaneous cut to benchmark interest rates and the required reserve ratio. The move may halt the market slide but we …
25th August 2015
Panic about China is overblown Investors are overreacting about economic risks in China. The collapse of the equity bubble tells us next to nothing about the state of China’s economy. In fact, recent data have been more positive than the headlines might …
24th August 2015
Sliding share prices over the course of the past week have exposed the limits of the government’s interventions to support the market. Indeed, in going to such lengths to save the market, the government has probably set back the chances of it delivering …
21st August 2015
Today’s weaker-than-expected PMI will add to mounting concerns over Chinese growth. Nonetheless, we continue to believe that sentiment is currently overly downbeat and that policy support will limit the downside risk to economic activity over the course …
Economic activity in Tianjin has yet to return to normal several days after the devastating explosions there. The city is a major industrial centre and the world’s tenth largest port. While most of the port has remained in operation, damage to warehousing …
18th August 2015
Hong Kong’s GDP growth slowed last quarter, dragged down by a fall services exports and subdued consumer spending. Looking ahead, we expect growth to remain weak in the coming quarters as exports remains soft and monetary conditions begin to tighten. … …
14th August 2015
Today’s PBOC press conference supports our view that the fall in the renminbi as a result of the shift to a new reference rate mechanism was a one-off and not an attempt to engineer a large scale competitive depreciation. … RMB set to stabilise as PBOC …
13th August 2015
July’s weaker-than-expected activity and spending data will undoubtedly add to speculation that policymakers are trying to engineer a sustained devaluation of the renminbi in order to shore up growth. We think much of the data is not as bad as it looks …
12th August 2015
A second downward adjustment to the renminbi reference rate today suggests that policymakers are now more willing to give in to market forces than we had previously thought. That said, we still think the changes to the reference rate primarily reflect …
By setting a lower mid-point for the renminbi’s trading band the People’s Bank has sparked speculation that it is embarking on a competitive devaluation of the currency in order to shore up exports. In reality, the move was largely the result of a …
11th August 2015
The recent rebound in broad credit growth accelerated last month. With the impact of looser monetary policy still feeding through, we see further upside for credit growth in the months ahead which should help limit downside risks to economic activity. …
Yesterday's inflation data suggest domestic price pressures remained broadly stablelast month. Meanwhile, although exports were subdued, policy easing appears to have supported commodity import volumes which continued to strengthen in July. … Imports hint …
10th August 2015
When equity prices collapsed in 2007, property prices and sales also collapsed. This precedent has led to concerns that the latest stock market rout may spark a sharp fall in property demand. These fears seem overplayed given households’ limited exposure …
6th August 2015
Consumer price inflation is likely to have risen to an 11-month high in July on the back of surging pork prices. Volatility in food inflation aside, the bigger picture is that inflation is set to edge higher over the coming quarters, though not high …
5th August 2015
We wouldn’t read too much into the weak July reading of Caixin’s manufacturing PMI which we suspect was dragged down by bad weather and more downbeat business sentiment following recent stock market volatility. We still think policy support will ensure …
3rd August 2015
Renewed falls in China’s equity markets at the end of this month underline that investors are focused more than ever on policymakers’ intentions rather than fundamentals. Meanwhile, market interest rates have stayed near record lows and the renminbi is …
31st July 2015
Sentiment about the economic outlook for China has darkened again, with the equity market debacle casting a shadow. But we see three reasons to be relatively positive about prospects for growth in the second half of the year. … Three reasons why growth …
30th July 2015
China may be on the cusp of again widening the renminbi’s trading band with the dollar. The lesson of previous similar moves is that they have next to no impact on the medium-term path of the currency. … China set for further widening of renminbi …
24th July 2015
Today's PMI reading suggests that recent improvements in economic momentum may have been derailed this month by weaker foreign demand. … Caixin/Markit Flash Manufacturing PMI …
Our China Activity Proxy (CAP) points to growth being markedly slower than the official figures show. That said, it supports the view that growth stabilised in Q2 and that policy support has recently begun to help shore up economic activity. … Economy was …
22nd July 2015
The equity market has received all the attention recently but evidence that the labour market is coming off the boil arguably matters more to China’s economy. There was a big fall in the ratio of job openings to job seekers in Q2 and slightly fewer new …
20th July 2015
While the support to growth last quarter from surging equity turnover and rebounding property sales will fade before long, we think that policy support will help limit the downside risks to growth. … Policy support to counter growth risks from property, …
16th July 2015
China’s statistics bureau responded today to our argument that glitches in the way it calculates GDP have caused it to overstate growth in recent quarters. It has not laid our doubts to rest. … Longstanding error still exaggerating GDP …
15th July 2015
Q2’s stronger-than-consensus GDP growth partly reflects an unsustainable surge in financial sector activity that will prove short-lived. Even so, there are plenty of positive signs on broader economic momentum in today’s data too. … Growth stabilises on …
Headline credit growth slowed again last month, but the data are nonetheless consistent with a stepped up pace of policy support. Meanwhile, the fall in the value of foreign exchange reserves hints at a step-up in FX sales by the People’s Bank. … …
14th July 2015
The June trade data are relatively upbeat. A further recovery in external demand pushed up export growth to a four-month high. Meanwhile, although the fall in commodity prices late last year has kept y/y growth in import values in negative territory, a …
13th July 2015
With only a small and relatively wealthy portion of Chinese households exposed to the stock market, we aren’t particularly concerned about the impact of recent big falls in equity prices on consumption. Indeed, given that the stock market didn’t provide …
10th July 2015
Although the recent softening in global commodity prices helped pull down producer price inflation last month, today’s data still suggest that domestic price pressures are rising and that deflation concerns are overplayed. … Consumer & Producer Prices …
9th July 2015
We expect inflation to have risen in June and for further increases in months ahead to quash any lingering concerns over deflation. … Inflation picking …
8th July 2015
The response to the equity market collapse shows that officials have been rattled by a clear policy failure. But it doesn’t signal an about-turn on reform. … Leadership rattled but not reversing course on …
7th July 2015
Structural changes in China’s economy are transforming its economic relationship with the rest of the world, as domestic demand shifts from investment to consumption, outbound tourism surges and the private sector rather than the People’s Bank directs …
China’s leadership has doubled down on its efforts to prop up equity prices because it believes that its own credibility is now coupled to continued gains on the markets. … China puts faith in market …
6th July 2015
Strong sales and rebounding prices have raised hopes that China’s property sector is on the cusp of a turnaround. But those expecting a return to the rapid rates of construction growth seen over the past decade will be disappointed – developers are …
2nd July 2015
Today's PMI readings were slightly weaker than expected but do not change the general picture, which is that growth is recovering on the back of both an improvement in external demand and a policy induced pick-up in domestic activity. … Manufacturing …
1st July 2015
China’s equity markets ended a nerve-shredding month with a large bounce in the final hours of trading today. There are echoes of the bubble in 2007 and 2008 when prices swung wildly in both directions both on the way up and on the way down. A key …
30th June 2015
The failure of Saturday’s policy moves to lift equity prices for more than a few minutes at the start of trading today has focused attention on what else policymakers might do to support the markets. The lesson from China’s last equity bubble is that, …
29th June 2015
A “best case” scenario is that a continued equity collapse would knock a percentage point off China’s GDP growth simply by cooling currently overheated financial sector activity. But the rapid expansion of leverage over the past year means that a sharper …
26th June 2015
A new proposal to do away with the loan-to-deposit ratio won’t relax the primary constraints on bank lending. It should, however, mean that a greater share of lending is directed towards smaller and generally more efficient firms. … Scrapping the …
24th June 2015
Although activity remains subdued in parts of the economy, most notably property and heavy industry, our China Activity Proxy (CAP) suggests that policy support is helping to shore up growth. … GDP growth on track to rebound in …
The flash reading of China’s manufacturing PMI rose further in June, led by a rise in new export orders. This, put together with recent evidence that policy measures are helping to shore up domestic demand, means there is good reason to think that the …
23rd June 2015
China’s banks are reporting a deterioration in loan demand that raises questions about the effectiveness of recent policy loosening. We put more weight on actual lending, which has remained strong, but this is a shift that deserves close attention. … …
19th June 2015
The local government debt swap is starting to have an impact on the flow of financing in China that has been widely overlooked and that should support the economy. Local governments have begun to issue bonds in recent weeks to refinance the loans of local …
18th June 2015
Hong Kong has both the highest life expectancy and the lowest birth rate in the world. One consequence is that Hong Kong’s working age population is set to decline by more than that of any other territory over the next 30 years, which would erode the …
16th June 2015
An improvement in most of the key activity and spending indicators for May suggests that recent policy support measures are seeing some early success in shoring up economic activity. … Activity & Spending …
11th June 2015
Headline credit growth continued to slow last month, but the latest figures are nonetheless consistent with a stepped up pace of policy support. … Bank Lending & Broad Credit …
Today’s doubling of the quota for local government debt swaps indicates that the central government believes the programme has so far been a success, even if banks have only been buying the new bonds under duress. The swap and shift to bond financing …
10th June 2015
Today's data support our view that, the usual volatility in food inflation aside, price pressures are rising and that deflation concerns are overplayed. … Consumer & Producer Prices …
9th June 2015
Foreign demand still looks subdued, despite a stronger-than-expected recovery in export growth. Meanwhile, a fall in commodity import volumes disappoints hopes that recent policy support measures would shore up import demand. … Trade …
8th June 2015
