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We recently held a series of Asia-focussed roundtable discussions with clients in London, covering an array of topics including the impact of Fed easing, the US election, global fracturing and China’s stimulus blizzard. This Update answers several of …
1st October 2024
This page has been updated with additional analysis since first publication. Stimulus measures will shore up near-term activity While the official PMIs held up okay in September, the Caixin PMIs dropped quite sharply which suggests that the economy lost …
30th September 2024
Overview – A pivot towards fiscal and monetary stimulus should support China’s growth in the near-term. But the economy continues to be propped up by investment, still elevated levels of construction, and the willingness of trading partners to allow …
27th September 2024
Stimulus implementation gets underway A flurry of policy announcements propelled the largest weekly gains in Chinese equities since 2008 this week (CSI 300 up 15.7%; Hang Seng 13.0%). The catalyst was Tuesday’s stimulus announcement , which included …
China’s finance ministry appears to be lining up a fiscal support package to deliver on the Politburo’s pledge of additional support for the economy. If a report by Reuters is correct, the package could lift GDP by around 0.4% over the course of the next …
26th September 2024
Leadership hints at further stimulus measures The readout of the Politburo’s quarterly meeting on economic affairs has just been published by state media. It acknowledges that new problems have emerged in the Chinese economy recently and calls for …
Our China Activity Proxy suggests that growth slowed in August, with construction seeing the sharpest deceleration. Alongside today’s monetary easing, an uptick in fiscal spending will help keep the economy afloat over the rest of this year, but it won’t …
24th September 2024
But still falls short of what’s needed In a departure from their previous approach of drip-feeding piecemeal support measures, China’s financial regulators have just announced a coordinated package of stimulus measures. This is a step in the right …
Tailwind from Fed’s easing cycle will be small The US easing cycle that got underway with a 50bp cut this week will provide a boost to economic activity in Hong Kong, where a fixed exchange rate means interest rates track those in the US. We expect the …
20th September 2024
The PBOC fails to deliver cuts The lack of any reduction to policy rates today, despite the clear economic case for doing so, underscores the extent to which the PBOC remains constrained by concerns about bank profitability and declining long-term bond …
An acceleration in fiscal spending during the final months of the year should mean the 2024 growth target of “around 5.0%” is met, but only just – we now expect growth of 4.8% this year. China’s slowdown is likely to continue over the coming years as …
19th September 2024
A disappointing outturn Activity growth slowed last month, falling short of expectations across the board. The service sector is still faring reasonably well and the fiscal support that’s already in the pipeline should help to stabilise wider growth over …
16th September 2024
The US is moving to limit the de minimis tariff exemption that has supported a surge in low value shipments from China over recent years. Only a subset of the roughly 8% of China’s exports to the US that are currently tariff-exempt would be at risk under …
13th September 2024
A temporary boost to employment growth After years of delay, China’s legislature today passed a bill that raises the statutory retirement age for the first time since 1978. In January, it will increase from 60 to 63 for men, 55 to 58 for white-collar …
Renewed slowdown in credit Both broad credit and bank loan growth slowed in August, coming in below expectations. (See Chart 1.) While stronger government spending should give the economy a boost over the coming months, that doesn’t seem likely to be …
A second Trump term would bring greater uncertainty to US-China relations, challenges to a global economic order that has helped China prosper, higher tariffs (probably) on Chinese goods, and (possibly) a global retreat from free trade. All of this would …
12th September 2024
The Fed’s upcoming monetary easing cycle will probably provide less of a tailwind to EMs than is widely thought. While it’s likely to give some central banks (such as in the Gulf, Mexico and Indonesia) a green light to lower interest rates, EM rate …
Exports set to remain a near-term bright spot Export values grew y/y at the fastest pace in 17 months, with export volumes hitting record highs. We expect exports to remain robust in the near term, supported by the decline in China’s real effective …
10th September 2024
The new US controls on exports of semiconductor manufacturing equipment will slow China’s ability to expand its advanced chip-making capacity. While the immediate economic impact will be small, it will leave China’s hi-tech industry reliant on foreign …
9th September 2024
This page has been updated with additional analysis since first publication. Overcapacity continues to weigh on prices Despite a weather-related surge in vegetable prices, a fall in energy prices and core inflation meant CPI only rose a touch. Meanwhile, …
What will the US election mean for Asia's growth outlook? Will China's strength in emerging technology help it overtake the US? Is India doing what is needed to fulfil its growth potential? We’re tackling these issues and more in an Asia roundtable in …
6th September 2024
This report was first published on 2nd September covering the official PMIs and the Caixin manufacturing PMI. We added commentary on the Caixin services and composite PMIs on 4th September. Growth has stabilised thanks to policy support The PMIs for …
2nd September 2024
Canada joins tariff hiking club On Monday, Canada announced a 100% tariff on imports of Chinese electric vehicles and 25% tariffs on aluminium and steel. The tariffs themselves won’t have much of a macro impact – the affected goods make up less than 0.1% …
30th August 2024
Falling house prices and a soft labour market will continue to hold back consumer spending over the coming months. And with the PBOC concerned about a bond bubble, large-scale monetary easing appears unlikely. But a ramp up in fiscal spending and …
Our China Activity Proxy suggests that activity growth edged up in July thanks to a ramp-up in fiscal spending. Policy support will continue to drive a cyclical recovery over the coming months. But once support starts to fade and export growth weakens, …
29th August 2024
Against the backdrop of central bank buying, strong physical gold demand, and a surge in ETF holdings, China appears to have been a key driver of the rally in gold prices earlier this year. Looking ahead, we think that China’s appetite for gold will grow …
The PBOC appears poised to step up its efforts to prevent bond yields from falling, even though lower borrowing costs would help the economy right now. The inconsistencies in its policy approach are linked to the shifting whims of the Party leadership, …
The PBOC has just revealed that it purchased RMB400bn of government bonds from primary dealers today. This might seem like an odd move given that the central bank has spent recent months trying to prevent yields from falling. But most signs suggest that …
Still trying to fix the destocking scheme At a press conference today, the Ministry of Housing pledged to accelerate the purchase of unsold homes for conversion into affordable housing. Exactly how it intends to go about that is unclear. The national …
23rd August 2024
Corporate borrowing still growing at a decent clip China’s July credit data came in weaker than expected on Wednesday. In particular, despite the PBOC cutting the loan prime rate last month, net new bank loans to the real economy turned negative for the …
16th August 2024
It has been three months since policymakers unveiled plans to encourage SOEs to buy unsold homes from developers. Progress has so far been slow, not least because participation is voluntary and the incentives for firms to take part are lacking. But the …
Deceleration eases with growth nearing turning point After slowing in Q2, economic momentum appears to have stabilised somewhat last month, with a pick-up in consumer spending and services activity largely offsetting a slowdown in investment and …
15th August 2024
Signs of a thaw in frosty relations between India and China don’t point to a fundamental realignment in India’s position in a fracturing global economy. But they highlight a growing theme of some EMs tactically courting investment from China to put …
13th August 2024
Credit growth starts to recover, private demand still weak Broad credit growth ticked up in July, while bank loan growth only slowed a touch. (See Chart 1.) We expect a continued acceleration in government bond issuance to support a further expansion of …
Food prices drive up inflation but domestic demand remains weak Consumer price inflation ticked up in July, but this was entirely due to a weather-related rise in food price inflation. Producer price deflation was unchanged. While a ramp-up in fiscal …
9th August 2024
US recession risks yet to derail export outlook The recent batch of weaker-than-expected US data rattled global markets this week. But it hasn’t significantly altered China’s economic outlook. Admittedly, the risk of a US recession, which would hurt …
8th August 2024
Exports to stay robust, helped by NEER depreciation Growth in export values slowed last month, but this was mainly due to lower export prices. Export volumes remained near record highs. We expect outbound shipments to stay strong for a while, not least …
7th August 2024
Fears of a US recession have rattled EM equity markets at a time when EM economies themselves are showing more pronounced signs of weakness. Most EM currencies have held up well, suggesting a dovish tilt may come from EM central banks – particularly those …
5th August 2024
China’s economy has slowed recently but we think it will regain some momentum during the second half of the year. Consumers remain cautious and the housing market continues to weaken. But exports look set to stay strong for a while longer. And the …
2nd August 2024
We've been here before We wouldn’t take Tuesday’s pledge from the Politburo to tilt stimulus towards consumption at face value. The leadership called for policies to lift incomes and enhance the capacity and willingness of low- and middle-income groups to …
In its new urbanisation plan, China’s government is setting its targets low . The goal of reaching a 70% urbanisation rate in five years’ time could be met with far smaller increases in the urban population than have been seen in the past few years. And …
External demand no longer driving growth Hong Kong’s GDP growth slowed significantly in Q2, with activity expanding by just 0.4% q/q, down from a strong 2.3% q/q expansion in Q1, although this was slightly stronger than both we and the consensus expected …
31st July 2024
This report was first published on 31 st July covering the official PMIs. We added commentary on the Caixin manufacturing PMI on 1 st August and the Caixin services and composite PMIs on 5 th August. A poor start to Q3, but more policy support on its way …
Our China Activity Proxy suggests that the economy has lost some steam recently with weak domestic demand weighing on activity. Alongside recent rate cuts, policymakers have signalled that fiscal support will be ramped up soon, which should provide a …
30th July 2024
Leadership flags increased policy support but offers few new ideas The readout of the Politburo’s latest triannual meeting on economic affairs has just been published by state media. It was dovish in tone and adds to recent evidence that the leadership …
Growing drumbeat of support measures Policymakers’ concerns about the near-term outlook have become much more visible over the past couple of weeks. First, they took the unusual step of discussing the current economic situation in the Third Plenum …
26th July 2024
Surprise cut points to mounting policymaker concern The PBOC’s decision to cut the 1-year interest rate on its medium-term lending facility (MLF) earlier today is unusual for two reasons. First, the 20bp reduction is double the size of the PBOC’s usual …
25th July 2024
The complete Third Plenum “Decision” document provides interesting details on the leadership’s reform agenda across a range of areas. Overall though, it reinforces the central message in last week’s initial Plenum communiqué: Xi Jinping continues to place …
22nd July 2024
PBOC responds to leadership's call for more easing The PBOC has lowered its short-term policy rate for the first time since last summer, in line with our expectation for a cut this quarter. Its efforts to prevent long-term yields from falling therefore do …
GDP breakdown points to weaker services activity The lower-than-expected Q2 GDP figures released earlier this week suggest that China’s economy has lost some momentum recently. The detailed sectoral breakdown, published a day after the headline data, …
19th July 2024
