China’s retention of an “about 6.5%” growth target for GDP in 2018, while expected, undermines the argument that growth is being demoted as a central policy concern. Growth is likely to slow we believe, not least because the finance ministry is today …
5th March 2018
Saudi Arabia’s new bankruptcy law, which was approved by King Salman last month, will make it easier to deal with the fallout from corporate failures and, through improving access to credit, support the development of small and medium-sized enterprises …
1st March 2018
The removal of the two-term limit on China’s president is the clearest sign yet that Xi Jinping is reversing China’s reform era shift toward more institutionalised and rule-based politics. The quality of economic policy making is likely to suffer as a …
26th February 2018
The sell-off in financial markets, which was triggered by a reassessment of the outlook for US inflation and interest rates, has meant that government bond yields have jumped. But these recent moves are not yet a major cause for concern. Monetary …
15th February 2018
Monetary conditions should stay accommodative this year, even though the ECB has scaled back its asset purchases this month and the Fed will continue to gradually reduce its balance sheet. Bank lending is also likely to keep growing steadily. … Bank …
11th January 2018
Official talk about prioritising the “quality” of economic growth over speed has sparked speculation that the government may stop setting GDP targets. Unfortunately we think they are here to stay. GDP targets have been central to China’s economic policy …
22nd November 2017
The Party Congress kicked off today with the Report delivered by Xi Jinping. His ability to emphasise his contributions to Communist Party doctrine over those his predecessors hints at a successful consolidation of power. However, there were no signs in …
18th October 2017
Reform implementation is likely to accelerate after the Party Congress, particularly if President Xi emerges in a stronger position. But given Xi’s reluctance to relinquish state control over key parts of the economy, China’s structural problems are …
10th October 2017
With President Xi already firmly in charge of setting the government’s economic agenda, we don’t anticipate any major changes in policy goals after next month’s Party Congress. That said, a stronger Xi would be better placed to speed up the implementation …
13th September 2017
Anticipation is building ahead of next month’s Party Congress, which is widely seen as a potential watershed in policymaking if it results in President Xi successfully consolidating his power. The first evidence of how successfully he has been in …
7th September 2017
While other currencies have recently been rising against the US dollar, the Hong Kong dollar has been sliding to historic lows, albeit within the narrow confines of its currency peg. This is the result of ample domestic liquidity which has kept local …
24th August 2017
The value of China’s foreign exchange reserves fell by 10% in 2016 as the People’s Bank fought to prevent a disorderly decline in the renminbi. With the level of reserves still well above most estimates of what the PBOC needs to keep control of the …
9th January 2017
In the event of a trade war with the US, China’s response would go well beyond tariff increases. US companies would find their products and operations in China subject to tighter regulation that hampered their capacity to do business there. China’s …
17th November 2016
Despite the threat of being hit with high tariffs and being labelled a currency manipulator, China will see benefits in the election of Donald Trump. In the near term, the dollar’s weakness against other major currencies should ease pressure on the …
9th November 2016
China’s government has the resources to clean up the bad debts in its financial system. Even if the corporate sector were to default on a quarter of its debt and the government responded by bailing out the banks, total government debt would remain below …
19th May 2016
If the economy doesn’t show signs of a turnaround in coming months, we would have to downgrade our relatively upbeat view of China’s economic prospects. But we would need to see evidence of clear economic deterioration to believe that markets are …
1st February 2016
Markets appear convinced that China is in the midst of an economic crisis. Yet even on the basis of our relatively downbeat measure of China’s growth, it remains one of the world’s fastest-growing economies. … China, growth …
25th January 2016
A shift in market expectations about China’s exchange rate has put Hong Kong’s peg to the US dollar under fresh scrutiny. But despite the surge in speculation, we think the peg will stay for years to come. … Could Hong Kong’s peg survive a speculative …
19th January 2016
The willingness of the People’s Bank to sell over $100bn of foreign exchange reserves last month is a measure of its belief that a stable currency is in China’s interests and that current downward pressure is driven by speculative rather than fundamental …
7th January 2016
China’s activity data for November provide further evidence that policy easing has helped to stabilise the economy. We continue to expect conditions to improve over the coming months. … Further signs that the economy is turning a …
14th December 2015
The main significance of today’s announcement by the People’s Bank (PBOC) that it is cutting standing lending facility (SLF) interest rates is that it is experimenting with a new monetary policy framework. This shift in itself does not constitute monetary …
19th November 2015
The IMF’s decision to include the renminbi in the SDR basket will not directly increase demand for renminbi assets. The implicit endorsement of the renminbi as a reserve asset is unlikely to sway the decisions of global asset managers either. Indeed, …
16th November 2015
Taiwan’s president, Ma Ying-jeou, will try to use his meeting with the Chinese president Xi Jinping in Singapore on Saturday to highlight the big improvement in cross-strait relations during his presidency. But while the past few years have seen a …
5th November 2015
A communique released after the conclusion of the Fifth Plenum provides a glimpse at the contents of the upcoming Five-Year Plan. It suggests that policymakers are not wavering on their reform ambitions despite speculation that recent market volatility …
30th October 2015
The abolition of China’s controversial one-child policy may have grabbed plenty of headlines, but the economic impact of the move will be small. … Abolition of one-child policy does not alter growth …
29th October 2015
We shouldn’t expect China to have a statistical system as robust as those in the developed world. But the problems in China go beyond those normally found in an emerging economy. The biggest is that the GDP growth rate is politically sensitive, which …
16th October 2015
It is likely to be a long time before any “Shanghai-London Stock Connect” scheme gets off the groundand even when it does the impact will be small. … Shanghai-London Stock Connect, more hype than …
22nd September 2015
China’s statistics bureau last week announced changes to how its GDP figures are compiled. In principle, the shift should improve the precision of the data. In practice, the changes to historical real growth rates are small and questions about the …
16th September 2015
China’s latest proposals to shake-up state-owned industry are underwhelming. We expect the economy to continue growing at decent rates over the years ahead, but believe this will happen in spite of rather than because of the government’s plans for state …
Although there has been a surge of speculation in the wake of China’s exchange rate move that Hong Kong could abandon its US dollar peg, we expect the peg to remain in place well into the next decade. … Little chance of a Hong Kong …
27th August 2015
Panic about China is overblown Investors are overreacting about economic risks in China. The collapse of the equity bubble tells us next to nothing about the state of China’s economy. In fact, recent data have been more positive than the headlines might …
24th August 2015
A second downward adjustment to the renminbi reference rate today suggests that policymakers are now more willing to give in to market forces than we had previously thought. That said, we still think the changes to the reference rate primarily reflect …
12th August 2015
By setting a lower mid-point for the renminbi’s trading band the People’s Bank has sparked speculation that it is embarking on a competitive devaluation of the currency in order to shore up exports. In reality, the move was largely the result of a …
11th August 2015
China’s statistics bureau responded today to our argument that glitches in the way it calculates GDP have caused it to overstate growth in recent quarters. It has not laid our doubts to rest. … Longstanding error still exaggerating GDP …
15th July 2015
China’s leadership has doubled down on its efforts to prop up equity prices because it believes that its own credibility is now coupled to continued gains on the markets. … China puts faith in market …
6th July 2015
Hong Kong has both the highest life expectancy and the lowest birth rate in the world. One consequence is that Hong Kong’s working age population is set to decline by more than that of any other territory over the next 30 years, which would erode the …
16th June 2015
Flaws in how China’s GDP data are calculated exaggerated both the downward pressure on prices in the first quarter and the rate at which the economy is growing. … More evidence GDP growth …
4th June 2015
Unconfirmed reports that the People’s Bank is considering buying local government bonds have sparked talk of impending QE in China. That’s wide of the mark: unlike with asset purchase programs elsewhere, the goal in China may actually be to avoid …
28th April 2015
The slide in inflation in China, as elsewhere, has been driven primarily by commodity price falls due to increases in global supply. It is unambiguously positive for China’s economy. Evidence that domestic oversupply has contributed to the latest price …
16th February 2015
The Swiss National Bank’s (SNB) decision last week to abandon its exchange rate ceiling has put Hong Kong’s peg to the US dollar under fresh scrutiny. While the peg creates a number of problems, it remains the best option for Hong Kong. We expect it to …
20th January 2015
The government is tomorrow likely to announce an upward revision of perhaps 5~10% to its estimate of the size of China’s economy. Nothing will have changed on the ground, but the data revisions will influence debates about imbalances, the scale of China's …
15th December 2014
The foreign exchange reserves of the People’s Bank would be of little use in the event of a debt or banking crisis in China. The bulk of the costs of any clean-up would ultimately still be paid by the government. … FX reserves are no magic bullet in a …
25th June 2014
The ongoing slowdown in the property sector is hitting land sales, which some have suggested has worrying implications for local government finances. We think the risks are being exaggerated and that land sales, and indeed the property sector as a whole, …
5th June 2014
The recent slide of the renminbi and February’s weak exports have been linked by some to a supposed loss of competitiveness in China’s export sector. In fact, despite rapid wage growth and trend appreciation of the currency, Chinese exporters are still …
14th March 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
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 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
The free trade zone about to be set up in Shanghai is intended as a testing ground for new policies, with a focus on liberalising the service sector, and financial services in particular. Successful innovations will ultimately be rolled out nationwide, …
13th September 2013
The Fed’s policy stance may breathe some more life into the US economy in coming years. But it could also sow the seeds of the next financial crisis by inflating new asset bubbles. … Is the Fed sowing the seeds of the next financial …
13th December 2012
China’s economic slowdown is the result of policy tightening and weak global demand but it also reflects structural shifts in China’s economy. As a result, expectations for a strong and sustained rebound in China’s growth are likely to be disappointed. … …
27th September 2012
