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Fears that China is about to slam the brakes on its economy are overdone. Overheating is a far smaller threat than is commonly supposed and policy tightening will be implemented only slowly. … Is China shifting …
6th May 2010
China’s two PMIs are again giving conflicting messages on the state of the economy. About the only thing they agree on is that input prices have accelerated. But as long as manufacturers are not passing these price rises on to consumers, the inflation …
4th May 2010
Events in China and Europe this month have reduced the chances that China will raise interest rates in May, as we had expected. A first hike may now wait until the fourth quarter. … Interest rates likely to remain on hold until …
30th April 2010
The surge in China’s copper imports last month has been taken by some as evidence that final demand is booming. But with inventories at unprecedented levels, import demand looks set to tail off again. … What should we make of China’s surging copper …
29th April 2010
Our China Activity Proxy (CAP) suggests that China’s economy expanded more last quarter in y/y terms than the official GDP figures showed. But q/q growth is a better guide to the strength of the economy today. On this measure the pace of growth has …
23rd April 2010
China’s attempt to crack down on speculative activity in its property markets does not signal that a property bubble is either inflating or about to burst. The new measures should help to tame price rises in those hotspots where recent gains have been …
21st April 2010
At first glance, today’s GDP data might suggest China is overheating. However, the acceleration in y/y growth in Q1 was entirely due to weakness a year ago. Growth has continued to slow in q/q terms and the economy is now expanding at an unremarkable …
15th April 2010
The death toll from today’s earthquake in Western China is likely to rise as more details come in. The affected region is among China’s poorest and, perversely, rescue and recovery efforts could end up giving a small boost to national GDP. The extreme …
14th April 2010
Speculative inflows into China’s economy were weak in the first quarter, but they seem to have picked up in the last few weeks as expectations have strengthened that the renminbi’s appreciation against the dollar is about to resume. … How strong are …
12th April 2010
China’s first monthly trade deficit in six years might win it some respite from pressure to do more over its exchange rate, particularly if followed, as we expect, by a resumption of renminbi appreciation in the next few weeks. But the calm won’t last. …
10th April 2010
Chinese firms are increasingly confident. In particular, large state-owned firms have rapidly recovered their optimism. But smaller businesses remain more subdued, which probably means that employment growth will disappoint. … NBS business conditions …
9th April 2010
The US Treasury’s decision to delay release of the semi-annual currency report in which it names “currency manipulators” among major trading partners has had a negligible impact on market expectations of renminbi appreciation. The nondeliverable forwards …
7th April 2010
Both of China’s purchasing managers indices are back at a level consistent with rapid output growth, while the price components give no cause for concern about inflation. … PMIs …
1st April 2010
Chinese policymakers are reportedly close to agreement on the next step in exchange rate reform: a widening of the renminbi’s trading band with the dollar. This would be a sensible move, but its immediate impact would be largely symbolic. … Wider renminbi …
31st March 2010
Most of the upward pressure on inflation in recent months has come from food prices. These are now stabilising and there are few signs of broader inflation pressures waiting in the wings. … Inflation Monitor …
The timing of China’s first monthly trade deficit in six years, if confirmed by March’s data, is almost too good to be true. … China set for a well-timed trade …
30th March 2010
Many low-end exporters have wafer-thin margins, but that doesn’t necessarily mean currency appreciation would be a threat to their survival. Talk that narrow margins are a major obstacle to currency reform is therefore overdone. … Can exporters cope with …
24th March 2010
The Capital Economics China Activity Proxy (CAP) shows that activity remains strong in y/y terms. However, in the q/q terms that matter more, the pace of growth has almost halved. … Activity slowdown argues against rapid …
22nd March 2010
The US Treasury’s upcoming announcement on whether China is a “currency manipulator” might not be the pivotal moment some are expecting. That doesn’t mean that a quarrel over the exchange rate can be avoided. On the contrary, tensions between the two …
18th March 2010
China’s businesses and banks remain confident and do not think the economy is overheating, but consumers are unhappy about prices and reluctant to spend. … The view from the ground – Q1 …
16th March 2010
Figures released today suggest that inflation expectations are easing in China. This measure of expectations has a very poor record as a guide to what is about to happen to inflation, but the latest data at least strengthen the argument that price …
We find it increasingly hard to recognise the inflation-ridden, bubble-filled China that we read about in the newspapers. Popular consensus seems to be settling on the view that China is overheating. We disagree. In the interests of outlining why, we list …
We expect China to raise interest rates and announce a series of required reserve ratio (RRR) hikes over the next few months, but this should not be interpreted as aggressive tightening. Indeed, the direct impact on economic growth will be tiny. … How …
11th March 2010
Relatively mild increases in consumer and property prices in the first two months of the year relax pressure for immediate policy tightening in China. … No rush to …
This report is only available as a PDF. Click to download. … Trade (Feb.) …
10th March 2010
Recent comments from People’s Bank Governor Zhou Xiaochuan make it likely that the renminbi’s dollar peg will remain in place a while longer. When it is loosened, the pace of gains will be slow. … Where next for the …
8th March 2010
The Prime Minister’s address to the National People’s Congress today highlighted near-term policy continuity but offered little sign the government is getting to grips with China’s structural challenges. … Is China serious about …
5th March 2010
Chinese consumers played a major role in supporting economic growth over the past year. Even at the depths of the global crisis, consumer spending barely slowed. But this was not entirely because of the fortitude of Chinese consumers. The government …
4th March 2010
Consumer price inflation probably climbed to more than 2% last month and is likely to continue drifting higher. But a closer look shows few signs of major price pressures. … Inflation Monitor …
2nd March 2010
This report is only available as a PDF. Click to download. … PMIs (Feb.) …
1st March 2010
This report is only available as a PDF. Click to download. … Five key issues to watch at the National People’s Congress …
25th February 2010
This report is only available as a PDF. Click to download. … Hong Kong GDP (Q4) …
24th February 2010
Hong Kong’s economy will significantly outpace most people’s expectations this year, but inflation is likely to remain very low. … Hong Kong growth set to surprise on …
18th February 2010
Today’s inflation and loan data, and the latest statement from the People’s Bank, may reassure markets that the pace of tightening in China will not be as fast as many had feared. This seems right to us, but market jitters are likely to return when base …
11th February 2010
This report is only available as a PDF. Click to download. … Trade (Jan.) …
10th February 2010
Proposed increases to China’s minimum wages are relatively small and they tell us very little about the outlook for inflation. … Should we worry about minimum wage …
9th February 2010
The economic data have on the whole been very encouraging over recent weeks, but this strength has only fuelled market concerns about inflation and the prospect of monetary tightening. These worries will not go away – headline inflation will soon jump …
5th February 2010
China’s money supply expanded rapidly last year, but its growth is already subsiding. With spare capacity still a problem, the ongoing pick-up in inflation is unlikely to last for long. … Will monetary growth fuel …
3rd February 2010
New GDP estimates from the People’s Bank support the message from the latest PMIs that growth in China is stable and strong. However, we believe that growth has already slowed and that continued rapid loan growth will be needed to stop it falling below …
1st February 2010
This report is only available as a PDF. Click to download. … Fears of monetary tightening hugely overdone …
29th January 2010
The Capital Economics China Activity Proxy (CAP) points to surprising weakness in December. The reality is probably less worrying, but momentum is slipping. … Is China’s growth already …
28th January 2010
Growth is strong and inflation rising but China is not overheating. Nonetheless, interest rates are so low that a small hike would have little impact on the real economy. The People’s Bank could therefore surprise with an early move aimed at keeping …
25th January 2010
21st January 2010
Last week’s increase in the required reserve ratio for commercial banks was a strong signal that the ultra-loose monetary policy of 2009 is being reversed. Increases to administered interest rates are likely to follow. However, the level of interest rates …
19th January 2010
Hot inflows into China remain at a manageable level for now, but they doubled in Q4 relative to Q3 and are likely to be an increasing threat to monetary stability in the year ahead. … Hot money inflows …
15th January 2010
China today hiked the required reserve ratio (RRR) of commercial banks by 50bp. Interest rate hikes will follow but they will be limited by concerns over the durability of the economic recovery. … China starts to …
12th January 2010
This report is only available as a PDF. Click to download. … Trade (Dec.) …
10th January 2010
This report is only available as a PDF. Click to download. … NBS business conditions survey (Q4) …
8th January 2010
This report is only available as a PDF. Click to download. … How sustainable is China’s recovery? …
7th January 2010
This report is only available as a PDF. Click to download. … PMIs (Dec.) …
4th January 2010
