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A last minute rescue package allowed investors in the troubled “Credit Equals Gold No. 1” trust product to recoup the principal and the bulk of expected interest from their investment this week. But this will not be the last trust product that gets into …
30th January 2014
Worries about the health of China’s financial sector have been eased by today’s news that a high-profile default has been avoided on a troubled RMB3bn trust product (“Credit Equals Gold No. 1”). In the short term this is a victory for officials worried …
27th January 2014
Today's downbeat PMI suggests that the slowdown in China's manufacturing sector is accelerating. Tighter monetary conditions appear to be slowing domestic demand and will continue to weigh on growth in coming months. … HSBC/Markit Flash Manufacturing …
23rd January 2014
Contrary to some headlines this week, the ongoing decline in China’s working age population does not pose a major threat to China’s medium-term growth prospects. What matters is what happens to worker productivity, which will largely be determined by the …
Today’s GDP figures confirm that China’s economy slowed last quarter, with the monthly activity data showing that momentum was still slipping in December. In particular, the infrastructure investment that led the rebound in mid-2013 has faded. With credit …
20th January 2014
There has been some disappointment since the Third Plenum that the Party is not moving faster to reform the hukou household registration system. This may not matter much for the economy – the importance of the hukou system has already been eroded by other …
17th January 2014
December’s credit data are likely to set the tone for 2014: tighter monetary conditions are curbing credit growth. We expect this in turn to slow the growth of the economy. Meanwhile, the foreign exchange reserve figures confirm that the People’s Bank …
15th January 2014
At first sight, today’s trade data from China imply that export demand has weakened while domestic demand has picked up speed. But once we take into account previous distortions in the export data from over-invoicing and the high import share of China’s …
10th January 2014
Consumer price inflation fell further in December on the back of a sharp drop in food inflation. It may rebound this month due to the usual price volatility around Chinese New Year but is likely to remain subdued over the medium term. Despite the benign …
9th January 2014
The ongoing slowdown in China's economy is bringing into focus a tension in the government's objectives that is likely to be a key source of uncertainty in the months ahead. With the GDP growth target for 2014 reportedly the same as last year's, …
8th January 2014
Inflation appears to have finished 2013 on a subdued note. Policymakers’ latest moves to tighten the regulation of shadow banking along with other measures intended to rein in credit growth should keep price pressures under control in 2014. … Inflation …
7th January 2014
Pledges by the People's Bank to end currency intervention are likely to crumble in the face of sustained pressure on the renminbi to appreciate. We think that China's central bank could accumulate another half a trillion dollars of foreign exchange in …
6th January 2014
The latest PMI surveys signal that there was a broad slowdown in manufacturing activity at the end of 2013. Most notably, activity among large firms, a recent source of strength, has turned a corner and is likely to cool further as policymakers move to …
2nd January 2014
China’s interbank rates have surged this week on the back of seasonal tightness in liquidity that has been compounded by uncertainty about policymakers’ intentions. But with the People’s Bank today making clear that it will act to return market conditions …
20th December 2013
Business sentiment about China’s broad economic outlook recovered this quarter but most firms remain downbeat about their own prospects. Bankers are relaxed about the current state of monetary policy. Meanwhile, Chinese households have turned slightly …
19th December 2013
The Capital Economics China Activity Proxy (CAP) suggests that GDP growth has slowed to around 7.5% y/y in the final quarter of the year. … GDP growth slowing in …
17th December 2013
Today’s downbeat flash PMI leaves little doubt that the manufacturing sector is now cooling. Tighter access to credit will continue to weigh on growth in 2014. … HSBC/Markit Flash Manufacturing PMI …
16th December 2013
China's government has sounded a sanguine note about GDP growth at the close of its Economic Work Conference. Monetary policy will remain "prudent" and fiscal policy "proactive" in 2014. In practice, these labels don't mean much. But with policy …
13th December 2013
While bank lending was stronger than anticipated last month, overall credit growth continued to slow. The relative strength of loan demand may reflect the fact that rising market interest rates have made banks a more attractive source of finance. … …
11th December 2013
Today's activity data releases provide further evidence that the momentum behind the summer rebound has peaked despite renewed strength in the state sector. A tighter policy stance is likely to cause growth to slow further over coming quarters. … …
10th December 2013
There has been a rush of interesting data over the past couple of days suggesting that inflation pressures are low and domestic demand is faltering, though exports were less impressive than might first appear. Meanwhile, a decision to allow the trading of …
9th December 2013
The acceleration in consumer price inflation that started in early summer looks near to an end. With policymakers focussing on reining in credit, and few signs of underlying price pressures, we expect inflation to be stable through the coming year … …
6th December 2013
China’s leaders are gathering again in Beijing, this time to discuss priorities for 2014. In this month’s China Watch we outline our views on what to expect on growth, monetary policy and reform. … What to expect in …
5th December 2013
The latest PMI surveys beat expectations but they also hint that momentum in manufacturing has peaked. In particular, output is outpacing orders. Meanwhile, all of the recent gains have come from large firms that are likely to come under pressure as …
2nd December 2013
China’s stock market rebounded strongly in the second half of November, as the comprehensive reform plan released following the Plenum seems to have eased fears of a sharp slowdown in the economy. Meanwhile, the People’s Bank has kept the onshore renminbi …
29th November 2013
The Third Plenum provided an impressive statement of reform intentions but it changed nothing on the ground. What signposts can we look for to gauge how rapidly new policies are being implemented? … How will we know if the Plenum reforms are on …
28th November 2013
The reform package agreed at the Third Plenum is unlikely to have a big impact on China's immediate economic outlook but, if implemented effectively, it should allow China to sustain stronger growth over the medium term than it otherwise would. However, …
21st November 2013
Today's downbeat flash PMI adds to the evidence that the recent economic rebound is fading. The efforts of policymakers to slow credit growth are set to further weigh on growth in the months ahead. … HSBC/Markit Flash Manufacturing PMI (Nov …
The Capital Economics China Activity Proxy (CAP) signals that the economy has slowed for a second successive month, despite continued strength in industry. … Industry still strong, but growth elsewhere …
20th November 2013
The Party leadership has given its blessing to land reforms that should shift more income to rural households. Change will happen slowly but the result should be a boost to consumer spending. … Land reform set to boost rural …
The reform plan unveiled following the Third Plenum has refocused attention on the position of state-owned firms in China’s economy. During the first decade of this century, China’s state sector shrank in size and economic importance while more productive …
18th November 2013
The underwhelming Communiqué released after the Third Plenum on Tuesday raised big questions about whether the leadership had been able to get backing for a meaningful package of reforms. On the basis of the more detailed blueprint published today, we …
15th November 2013
Another disappointing set of GDP figures for Hong Kong has tempered hopes for a strong revival of growth. A pick-up in global trade flows should help over the coming year, but we expect Hong Kong's growth to remain lacklustre by historical standards. … …
President Xi raised expectations ahead of the Third Plenum with talk of a “Master Plan” for reform. We should learn more in the days ahead but, based on what has been revealed so far, the decisions taken at the Plenum fall some way short. … No “Master …
12th November 2013
With output growth stable and inflation contained, October’s data signalled two key developments: a pull back in investment by the state sector, particularly in infrastructure, and a slowdown in credit growth. These are healthy developments even though, …
11th November 2013
Strong imports of industrial commodities last month suggest that China’s investment led rebound was holding up relatively well early in Q4. However, with policymakers again focussing on risks from excess credit, the rebound still seems unlikely to last. …
8th November 2013
China’s local governments have taken on unhealthy amounts of debt over the last few years but, unlike many, we do not think this should rank among policymakers’ primary concerns. Instead, we would focus on the much bigger increase in borrowing by the …
7th November 2013
After rising through the summer, consumer price inflation looks set to be stable over the rest of the year. With policymakers signalling renewed efforts to rein in credit growth, inflation should remain under control over coming quarters as well. … …
5th November 2013
Both PMI surveys released today suggest that China’s manufacturing sector picked up at the beginning of Q4. But in each case the breakdown of the survey paints a less rosy picture than the headline figure suggests. In particular, the strength of the …
1st November 2013
China's stock market fell in late October as money-market rates surged. A rerun of June's cash crunch is not on the cards, but there is increasing evidence that the policy stance is shifting back towards reining in credit growth. Meanwhile, the renminbi …
31st October 2013
Expectations that detailed new policies will be unveiled at the upcoming Third Plenum are likely to be disappointed. But the key gauge of success should instead be whether the leadership presents a coherent and comprehensive plan for economic …
30th October 2013
The manufacturing sector has gained some strength in October according to today's flash PMI but, with the government trying to rein in credit, slower growth lies ahead. … HSBC/Markit Flash Manufacturing PMI (Oct …
24th October 2013
The Capital Economics China Activity Proxy (CAP) suggests that the summer rebound in growth came to an end in September, as momentum in the state sector that had led the recovery began to fade. … Momentum …
23rd October 2013
For all the headlines talking about a rebounding property sector in China, sales over the past few months have been no higher than they were a year ago. Developers may be benefiting from price rises on the units they sell but, unless the volume of …
Today’s GDP data were squarely in line with expectations. The more interesting development was the slowdown in infrastructure investment in September amid broader signs that the momentum of the economic rebound is already fading. A slowdown in growth in …
18th October 2013
The Hong Kong dollar peg was introduced 30 years ago this week. Although the peg creates a number of problems, it remains the best option. We expect it to remain in place for many more years. … How long will the Hong Kong peg …
16th October 2013
The People’s Bank (PBC) has been purchasing foreign exchange at a frantic rate in recent weeks,underlining again how reluctant policymakers are to leave the renminbi in the hands of market forces.Among many other implications, this suggests that capital …
14th October 2013
The slew of September data released in the last few days reveal a welcome slowdown in broad credit growth and a sharp pick-up in inflation. The latter may look alarming, but on closer inspection it shouldn't be. Meanwhile, China's export data are just the …
Consumer price inflation probably rebounded last month, thanks to a rise in vegetable price inflation. In general though, inflation in most areas is stable, with no sign that the economy’s summer rebound is stoking any increase in price pressures. We …
10th October 2013
The underwhelming launch of the Shanghai Free Trade Zone (FTZ) has led many to reassess the likelihood of the zone becoming a test bed for far-reaching policy reform any time soon. If anything, the chances that Shanghai will establish itself as a global …
9th October 2013
