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Nearly three months after the People’s Bank signalled a shift in stance and first cut the required reserve ratio, policy remains tight. Admittedly, benchmark interest rates never climbed back to the levels they were at before the last round of easing …
21st February 2012
The weekend cut to reserve requirements was so long in coming that some investors had begun to question whether the People’s Bank was really committed to policy loosening at all. We believe it is, though officials are treading carefully, and that several …
20th February 2012
Data released on the eve of Vice President Xi Jinping's visit to the US show that China's current account surplus has continued to tumble. But plenty of potential sources of trade friction remain. … Current account surplus falling but trade frictions …
14th February 2012
We draw two very tentative conclusions from today’s lending and trade data: domestic demand is still slowing and the pace of policy easing is very slow. … Lending & Foreign Trade …
10th February 2012
China is undergoing a major shift in its labour market as the surplus of rural workers dries up. But, after delving into the details, we conclude that several factors will dampen the speed at which the macroeconomic impact is felt. Perhaps most important, …
9th February 2012
The distortion caused by Chinese New Year contributed to the higher-than-expected headline consumer price inflation in January but it will also bring February’s figures down markedly. We do not believe that the trend of fading inflation has changed. … …
Consumer price inflation was probably little changed in January but it is still likely to be much lower in a few months’ time. … Inflation Monitor …
8th February 2012
The economies of Asia and Latin America should be able to weather any financial contagion stemming from Europe’s debt crisis. But the economies of emerging Europe – notably Hungary, Turkey and the Balkan countries – look far more vulnerable to possible …
6th February 2012
The Capital Economics China Activity Proxy (CAP) provides further evidence of a spurt in economic activity at the end of 2011. But property construction does seem to be slowing and, for that sector at least, worse lies ahead. … Property crumbling, but …
Hong Kong’s economy remained weak in the fourth quarter. Despite an expansionary budget, falling inflation, and the prospect of continued strong spending by Chinese tourists, Hong Kong’s trade-dependent economy faces a difficult year ahead. … Hong Kong …
1st February 2012
Both of China’s manufacturing PMIs have picked up over the past two months, adding to evidence that the economy has found its feet in the last few weeks. … PMIs …
Policy loosening in China has got off to a slow start. The People’s Bank chose not to cut the required reserve ratio (RRR) ahead of the Chinese New Year holiday, confounding widespread expectations. Instead, it helped banks respond to seasonal demand for …
26th January 2012
The flash PMI released today added to the impression that the economy is performing better than seemed likely a few weeks ago. China’s growth is still relatively subdued, but the economy ended the year of the rabbit with a spring in its step. … …
20th January 2012
China’s trade surplus has halved in the last three years thanks to global weakness and the strength of Chinese investment demand. We expect a further decline in 2012, but then a rebound as China’s investment-led growth model starts to run out of steam. …
19th January 2012
China’s Q4 data suggest the economy is stronger than previously thought. But problems in real estate are mounting as developers’ holdings of unsold properties swell. Meanwhile, investment appears to have risen even further as a share of GDP. … …
17th January 2012
Seasonal factors linked to Chinese New Year slowed inflation’s decline in December. The payback will come once the festival has passed when the headline rate is likely to register another significant drop. … Consumer Prices …
12th January 2012
Today’s trade data show an unexpectedly large drop in import growth. This may simply be a correction after a couple of months of relative strength, but it adds to the picture of slowing growth in China’s domestic demand. … Foreign Trade …
10th January 2012
China’s largest quarterly business survey shows that confidence among property developers has collapsed. Among firms more generally, it is private companies that – once again – are faring worst. … NBS business conditions survey …
9th January 2012
This report is only available as a PDF. Click to download. … How should we think about the leadership transition? …
Consumer price inflation may have stabilised in December, partly due to seasonal factors. But with spare capacity rising, further significant falls are likely after Chinese New Year. … Inflation Monitor …
5th January 2012
The Capital Economics China Activity Proxy (CAP) signals that economic growth has continued to slow. Our initial estimate is that the economy expanded less than 7% q/q in annualised terms in Q4. … Activity continues to …
22nd December 2011
After a run of bad data, many are now looking at prospects for 2012 with a sense of foreboding. GDP growth in Q4 may have dropped below 7% q/q in annualised terms. Monetary conditions have loosened a little in the wake of China’s policy shift but there …
21st December 2011
China’s flash PMI for December rebounded, but it remains below 50. What’s more, finished goods inventories are rising and some of the recent activity seems to have been aimed at clearing backlogs rather than fulfilling new orders. Against this backdrop it …
15th December 2011
The impact on emerging Asia of a fall in lending by euro-zone banks to the region would be small. However, Asia would be vulnerable if the crisis in the euro-zone caused global credit markets to freeze, particularly if this led to a re-run of the …
China’s 2008 stimulus was intended to buy time while the economy made the transition to sustainable, consumer-led growth. It hasn’t worked out as planned. The next few weeks are likely to reveal how little progress has been made. … Global slowdown will …
14th December 2011
It takes some reading between the lines in today’s statement on policy priorities for 2012 to find evidence that the policy setting has changed. Nonetheless, the shift is real. … Policymakers embrace pro-growth …
China’s latest trade data provide some room for optimism despite the downbeat headline figures. Restocking may explain most of the pick-up in commodity imports, but non-commodity imports increased too, which is an encouraging sign of resilience in …
12th December 2011
November’s drop in inflation was even sharper than expected and the data on investment and industrial output were weak too. The government is leaving its boilerplate language on policy unchanged. Monetary policy will, formally, remain “prudent”. In …
9th December 2011
We broadly agree with the consensus view that most emerging economies will hold up well in 2012. But with the US set to slow and the euro-zone heading towards break-up, the path ahead is going to be bumpy. Here are five developments that emerging market …
7th December 2011
Consumer price inflation may have fallen a percentage point or more in November. It will be a while before the impact of policy stimulus is felt, with the result that China faces a period of below-trend economic growth and further inflation declines. … …
6th December 2011
Policy stimulus is usually positive for Chinese equities but if it comes against a backdrop of a euro-zone break-up, gains are likely to be relatively low. In these circumstances, we would also expect renminbi appreciation to slow to a crawl. … What …
2nd December 2011
Even after a run of disappointing data, today’s PMIs were worse than most expected. It will be a while before policy easing helps the economy to turn the corner. … PMIs …
1st December 2011
With a statement comprising a single sentence on its website, the People’s Bank of China today signalled a major policy shift. Incoming economic data have been weak and the global outlook is worsening. Accordingly, policymakers may have to act more …
30th November 2011
The Capital Economics China Activity Proxy (CAP) suggests that economic growth has slowed significantly. … Growth slowing …
28th November 2011
The unexpectedly sharp drop in China’s flash PMI for November, if corroborated by other indicators, is likely to push policymakers to go beyond policy “fine-tuning” to outright easing. Today’s confirmation that the People’s Bank has lowered reserve …
23rd November 2011
Policymakers started talking in late October of the need for “fine-tuning”. There is now mounting evidence that policy has begun to shift direction. The People’s Bank lowered the yield on one-year bills, widely read as a signal of the policy stance, at …
21st November 2011
Rapid wage growth, renminbi appreciation and inflation have not put much of a dent in China’s export competitiveness. We expect export growth to halve next year, but for Chinese exporters nonetheless to do better than most. … How badly will China’s …
18th November 2011
Hong Kong escaped falling into recession in the third quarter, but the economy remains very weak. Given our forecast that global growth will slow further next year, and the risks of a local property price crash increasing, prospects for Hong Kong’s …
11th November 2011
Today’s data show that net new lending rebounded last month, while growth in broad money fell slightly. We expect credit controls to be eased officially soon and therefore see lending picking up further. … Lending and Broad Money …
Demand for China’s exports is much weaker than today’s headline growth figures suggest. We expect a sharp slowdown in export growth in November. But imports are growing strongly, implying that domestic demand is holding up well. … Foreign Trade …
10th November 2011
Inflation fell sharply in October and further falls are likely in coming months. With downside risks to economic growth high and rising, today’s data bolster our confidence that China’s policy is set to change direction soon. … Inflation …
9th November 2011
Consumer price inflation probably fell sharply in October and we expect a further steep fall in November. Credit policy is likely to be loosened in coming weeks. … Inflation Monitor …
7th November 2011
The coming few weeks are likely to mark a turning point in Chinese policy. October’s data should provide the clearest evidence yet that inflation is fading. Signs of stress are building in the real estate market. Meanwhile, global risks are rising. In …
3rd November 2011
China’s two manufacturing PMIs moved in opposite directions in October. We suspect that inventory restocking explains the rise in the more upbeat HSBC/Markit index. With final demand set to remain weak, this recovery will prove short-lived. … PMIs …
1st November 2011
Despite yet another round of speculation suggesting that China is about to ride to the rescue of the euro-zone, Europe will still have to solve its own problems. Meaningful Chinese support would probably require additional concessions that European …
29th October 2011
The Capital Economics China Activity Proxy (CAP) signals that the economy was strong to the end of Q3. But weaker growth lies ahead. … Growth holds up in face of …
27th October 2011
The rebound in the flash manufacturing PMI estimate for October from HSBC/Markit supports our view that China’s economy has at least been stablising. However, production is unlikely to pick up strongly in the near term amid weak conditions in the other …
25th October 2011
China’s attempts to rein in off-balance-sheet lending by banks have compounded the difficulties faced by smaller firms that were already cut off from formal credit channels. Net new bank lending last quarter was little changed from a year ago but the …
China’s Q3 data confirmed that growth was stable last quarter, but with both exports and real estate construction likely to slow, a more difficult period lies ahead. … Stable in Q3, but problems …
19th October 2011
The fall in the value of China’s foreign exchange reserves last month raises some potentially far-reaching questions about the nature of China’s currency intervention and whether it has been diversifying away from the dollar. … What should we make of …
18th October 2011
