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Policymakers will pay little attention to last month’s drop in inflation or the acceleration in exports, given the usual volatility around Chinese New Year. But a surge in off-balance-sheet bank lending may be a concern for officials who, it appears, had …
8th February 2013
The usual rollercoaster around Chinese New Year will have caused inflation to fall in January before sending it soaring this month. Once the seasonal volatility has faded, current evidence suggests inflation will be revealed to be on a mild upward trend. …
7th February 2013
With the People’s Bank determined to limit renminbi appreciation but reluctant to add to its foreign currency reserves, China’s commercial banks have taken on the role of the economy’s foreign exchange buyers of last resort. This cannot last. … Why are …
4th February 2013
China’s official PMI slumped last month, but this index is often choppy around Chinese New Year. We would put more weight on the continued rise in the alternative PMI from HSBC and Markit, as well as our own China Activity Proxy. … Manufacturing PMIs …
1st February 2013
The Capital Economics China Activity Proxy (CAP) points to a sharper economic turnaround than the official figures showed towards the end of last year. In the detail, data on cargo volumes back up disputed customs figures showing export strength. … …
30th January 2013
The Shanghai Composite index has risen 17% since early December. Even so, a trailing price/earnings ratio under 13 and the backdrop of a strengthening economy suggest that prices could rise much further. The large number of potential investors still on …
24th January 2013
Today’s better-than-expected flash manufacturing PMI from HSBC and Markit supports the view that China’s recovery is continuing at the start of the year. But distortions around Chinese New Year mean the latest data are less reliable than usual. … …
Wide income inequality in China is undermining economic stability as well generating concerns about social tensions. … Income inequality is an economic as well as social …
21st January 2013
Today’s Q4 GDP data confirm the turnaround in China’s economy but they show too that it is reliant on the single engine of investment. Continued policy easing would be needed to prolong the acceleration through 2013 but this seems unlikely to happen. As a …
18th January 2013
We are sceptical that published FDI data tell us much about China’s economic outlook. For what it’s worth though – and contrary to the headlines – today’s figures suggest the China is increasing its share of global FDI. They certainly do not imply that …
16th January 2013
Freezing weather drove food prices and inflation higher last month but, as we head into the Chinese New Year period, underlying price pressures appear subdued. … Consumer & Producer Prices …
11th January 2013
There were signs of strengthening developed world demand in China’s latest export data. Stronger growth in China is being reflected in rising imports. But with credit growth levelling off, a strong and sustained economic rebound does not seem likely. … …
10th January 2013
Property construction in China still needs to slow further to return the real estate sector to a sustainable path. Accordingly, the recent pick-up in investment by developers should not be welcomed, whatever the short-term boost to the economy. … …
9th January 2013
December’s data will give us the last “clean” view of inflation before price volatility around Chinese New Year obscures the picture. They are likely to show that consumer price inflation is rising, in part thanks to warming economic conditions, but that …
4th January 2013
China’s economy is recovering, but the Capital Economics China Activity Proxy (CAP) points to a less emphatic rebound than some recent commentary might suggest. Data available so far are consistent with Q4 GDP growth of about 7.6% y/y on the official …
20th December 2012
Business confidence in China has recovered slightly though it remains subdued. Banks are eager to lend but firms show little appetite for loans. Meanwhile, households are increasingly optimistic and expect inflation – and property prices – to rise in the …
18th December 2012
Hong Kong’s unemployment rate remains low despite the weak economy, as employers have responded to falling demand by cutting wage growth. The result has been a slowdown in consumption. Even if unemployment remains low in 2013, domestic demand is still …
China’s new leadership has raised expectations for economic policy reform in 2013 but, judging from the outcome of the Economic Work Conference that just concluded in Beijing, it has not yet decided on any major new initiatives. … Reform expectations …
17th December 2012
The nightmare scenario of the US Congress failing to reach a deal on the fiscal cliff would see growth in Asia’s most trade-dependent countries slow by up to 1 percentage point in 2013. … The US fiscal cliff: implications for …
Today’s upbeat flash manufacturing PMI from HSBC and Markit suggests that China’s recovery is continuing in the last few weeks of 2012. But a high level of inventories is continuing to weigh on output and, barring some change of course by policymakers, we …
14th December 2012
The release later this month of government proposals to reduce income inequality will provide early evidence of whether a change of leadership in Beijing has given new momentum to economic reform. The plan has been eight years in the drafting, but earlier …
13th December 2012
Today’s lending data released by the People’s Bank support the view that current policy support is insufficient to drive a prolonged acceleration in economic growth. … Lending and total social financing …
11th December 2012
Today’s disappointing trade data have added to our doubts about the sustainability of China’s rebound. The weekend’s figures on investment and industrial production were more encouraging but they underlined that recent strength has been driven by …
10th December 2012
China’s consumer price inflation is picking up and could spike much higher around February’s Chinese New Year holiday. It will be higher than today once that seasonal distortion passes, but we don’t think the level will be alarming. … Inflation Monitor …
6th December 2012
China’s two manufacturing PMIs are both above 50 for the first time in over a year. But the recovery is unbalanced, with smaller firms reporting that conditions are the weakest in six months. … Manufacturing PMIs …
3rd December 2012
The government is likely to set a low target for growth next year that the economy will beat. But expectations that China’s growth will continue to accelerate through 2013 are likely to be disappointed. In this month’s China Watch we outline our views on …
30th November 2012
Purchases of foreign exchange by the People’s Bank have slowed to a crawl this year. We believe this is a pause in, rather than the end of, China’s era of massive foreign reserve accumulation. … PBC foreign exchange purchases set to …
29th November 2012
Today’s flash manufacturing PMI from HSBC and Markit provides further reassurance that recovery is underway, but hopes for a strong rebound will probably be disappointed given lingering weakness in domestic demand and uncertainty overseas. … HSBC/Markit …
22nd November 2012
The Capital Economics China Activity Proxy (CAP) confirms that China’s economy has picked up speed. So far though, the recovery still looks weak and lopsided, with key sectors being left out. … A real …
21st November 2012
For years, the abiding view of China has been of a workshop powered by waves of young migrants able to outcompete workers elsewhere on the basis of low wages. This image is increasingly wide of the mark. The wage of the average migrant worker has …
The last two months have brought strong evidence that China’s economy is picking up speed. But this is a lopsided recovery. Small firms are still struggling, according to the official manufacturing PMI, while investment in manufacturing continues to slow. …
20th November 2012
Hong Kong’s economy returned to growth in the third quarter, but the pace of expansion was still very weak. With the global economy likely to remain depressed over the next year, a strong rebound looks unlikely anytime soon. … Slow growth in Hong Kong …
16th November 2012
The unveiling of China’s new leadership in the Great Hall of the People today has dented hopes of economic policy reform. Of the three “reformist” candidates thought to have had a chance of joining the Politburo Standing Committee, the Communist Party’s …
15th November 2012
A new government scheme to stabilise China’s volatile pork market appears to be succeeding. As a result, the re-emergence of pork-driven inflation that some have started to warn about is unlikely to happen. … Should we worry about pork prices …
14th November 2012
The tepid pace of bank lending revealed in figures released today will not be much of a concern to policymakers given the upbeat tone of recent economic data, including October’s double-digit increase in exports. … Slow loan growth no concern given …
12th November 2012
China’s October activity data provide the strongest signs so far of economic recovery. Given that they have been published while the Party Congress is in session, some sceptics have questioned whether they can be believed. In our view, there is solid …
9th November 2012
A further doubling of average incomes this decade, as pledged in the Party Congress today by President Hu Jintao, will probably not undermine China highly-competitive manufacturing sector. … Are rising wages hurting China's …
8th November 2012
The imminent leadership change in China is a more significant event for emerging economies than the re-election of President Obama. The installation of a cohesive Chinese leadership committed to putting the economy on a more sustainable footing would …
7th November 2012
China’s consumer price inflation was stable in October, we believe. Looking ahead, both inflation and economic activity look likely to pick up some pace in the next few months, weakening the case for further policy stimulus. … Inflation Monitor …
6th November 2012
For emerging Asia as a whole, private sector credit as a share of GDP has surged over the past few years and is now at an all-time high, leading some commentators to suggest that the region could be planting the seeds of the next financial crisis. We are …
1st November 2012
The pick-up in China’s two manufacturing PMIs provides further signs of recovery in October, with particular strength in new orders. … Manufacturing PMIs …
China’s once-in-a-decade leadership transition reaches a climax in November when a new generation takes control of the Party. In this China Watch , we ask who the key figures of the new leadership are likely to be and give some rough thoughts on what the …
31st October 2012
The renminbi has risen 2% against the dollar since the end of July, erasing all of its losses in the year to date. There appear to be two factors at work. One is a renewed appetite for the renminbi among firms and investors. China’s trade surplus has …
30th October 2012
A declaration by a US administration that China is a “currency manipulator” may have no immediate consequences but it would open the door to more substantive trade sanctions against China in future. … “Currency manipulation” tag would still carry …
29th October 2012
Some commentators have turned optimistic about the outlook for Chinese residential property. We remain of the view that, with inventories still high, a big pick-up in property investment is unlikely. Moreover, if it did happen, this would be negative for …
25th October 2012
Today’s flash manufacturing PMI from HSBC and Markit provides further signs of a mild recovery in China’s economy. … HSBC/Markit Flash Manufacturing PMI (Oct. …
24th October 2012
The Capital Economics China Activity Proxy (CAP) provides further evidence that the pace of growth in China’s economy accelerated last month. … Activity strengthened at …
23rd October 2012
Today’s data releases provide the strongest signs yet that China’s economy stabilised in Q3, along with glimmers of hope that a recovery began towards the end of the quarter. But we are sceptical that the rebound is as strong as the official numbers …
18th October 2012
Debates over whether China is facing a “hard landing” generally miss the point that an economic slowdown can affect different groups in different ways. Right now, Chinese policymakers seem not too concerned that the economy is slowing as the labour market …
17th October 2012
The September import data suggest China’s economy was still weak at the end of Q3. By contrast, last month’s exports were unexpectedly strong, as they were for both Korea and Taiwan, with demand from emerging economies offsetting weakness in the US and …
15th October 2012
