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China faces slow recovery from first contraction on record GDP contracted in Q1 for the first time since China began publishing quarterly data in 1992, though we suspect that the slump in output was even deeper than officials claim. The monthly data …
17th April 2020
Worse still to come for exports Shipments picked up last month as factories re-opened and domestic demand began to recover. But with economic activity in the rest of the world now collapsing, the worst is still to come for China’s export sector. The …
14th April 2020
Activity improves but recovery to be slow The Caixin manufacturing PMI strengthened last month from February’s abysmal levels and suggests that the contraction in activity has already bottomed out. But weak foreign demand and labour market strains will …
1st April 2020
Past the worst but weakness to drag on The latest survey data add to broader evidence that activity has started to rebound but suggest that weak foreign demand and labour market strains remain headwinds. The official manufacturing PMI increased from 35.7 …
31st March 2020
Weakest-on-record data point to a sharp contraction in Q1 The latest activity and spending data were much weaker than expected and point to a far deeper downturn than during the Global Financial Crisis. While domestic conditions should improve slowly in …
16th March 2020
Policy support keeps the credit taps on Credit growth was stable last month despite the slump in economic activity. In most countries, credit growth would slow sharply in response to a shock such as the coronavirus, as households defer large purchase and …
11th March 2020
A disinflationary shock The coronavirus outbreak is putting downward pressure on inflation. While supply chain disruptions have kept food prices high, weaker demand has weighed on the price of other goods and services. Consumer price inflation fell from …
10th March 2020
Imports yet to reflect the slump in demand Exports dropped the most since 2008 at the start of this year. Imports held up better but at the expense of a jump in inventories. Inbound shipments will soon play catch-up with the slump in domestic demand. …
9th March 2020
An unprecedented slump in activity The latest PMI readings were in line with our downbeat expectations but will come as a shock to most analysts, who had anticipated a much smaller hit to business activity from the coronavirus outbreak. Particularly …
2nd March 2020
Fiscal stimulus helps offset coronavirus hit to credit demand Strong government bond issuance left growth in outstanding broad credit unchanged last month, though weaker corporate borrowing suggests that the uncertainty caused by the coronavirus was …
20th February 2020
Inflation hits eight-year high Seasonal volatility and coronavirus disruptions pushed up consumer prices in January. But the PBOC is likely to look through this temporary rise in inflation when setting policy. Consumer price inflation increased from 4.5% …
10th February 2020
PBOC leans against renminbi depreciation The PBOC doesn’t appear to have deployed its FX reserves last month to limit renminbi depreciation triggered by the coronavirus outbreak. But there are signs that it has intervened in other ways. The value of the …
7th February 2020
Coronavirus to exacerbate ongoing recession Hong Kong’s economy continued to contract last quarter and the Coronavirus outbreak will probably keep the city in recession for a while longer. The city’s GDP contracted 0.4% q/q in Q4 in seasonally adjusted …
3rd February 2020
Survey fails to capture Coronavirus shock While the Caixin manufacturing PMI edged down last month, the survey was conducted too early to tell us much about the extent of the economic damage from the Coronavirus outbreak. The February survey data will …
Overtaken by the coronavirus The official PMIs show that manufacturing activity weakened, and non-manufacturing strengthened, in the lead-up to the Coronavirus outbreak. The following months’ PMIs will give insight into how damaging the virus is. The PMIs …
31st January 2020
Economic activity finishes 2019 on a stronger note Economic activity picked up last month, helping to avert a further slowdown last quarter. But despite the recent uptick in activity, we think it is premature to call the bottom of the current economic …
17th January 2020
Monetary easing still insufficient to lift credit growth Growth in outstanding broad credit was unchanged last month as a slowdown in bank lending and direct financing was offset by an easing contraction in shadow credit. With credit growth less …
16th January 2020
Trade data less upbeat than meets the eye Headline trade growth surged in December. But this is more a reflection of base and price effects than of current strength. And while the outlook for exports is improving, domestic demand will remain subdued. …
14th January 2020
Pressure on food prices ease Moderating food price inflation took the pressure off consumer price inflation while producer price deflation eased thanks to base effects and an increase in energy prices. The big picture is that demand-side pressures remain …
9th January 2020
Outflows shrink as trade tensions ease The official foreign exchange reserves figures suggest that the PBOC continued to refrain from direct FX intervention last month on the back of easing trade tensions. With outflows moderating – and pressure on the …
7th January 2020
External demand recovering but construction cooling The manufacturing PMIs ended 2019 higher than where they started the year but we doubt this means the worst is over for China’s economy. While it does appear that export growth is bottoming out, downside …
2nd January 2020
Strong headline figures only half the story The activity and spending indicators beat expectations. But retail sales and real estate activity are weaker than the headline figures suggest. And we think growth will resume its downward trend before long. …
16th December 2019
Monetary easing still failing to lift credit growth Growth in outstanding broad credit was unchanged last month, despite recent monetary loosening by the People’s Bank. This suggests that more aggressive action will be needed to shore up growth. Chinese …
10th December 2019
Headline inflation close to a peak Rising pork prices pushed consumer price inflation to its highest level in close to eight years last month. But the pick-up in food inflation will reverse soon and broader demand-side price pressures remain weak, with …
Base effects mask continued weakness in domestic demand Exports continued to languish last month and the pick-up in headline import growth reflects base effects rather than stronger domestic demand. Meanwhile, FX reserves data released over the weekend …
9th December 2019
Pressure on manufacturing appears to have eased The survey data improved across the board last month, hinting at a pick-up in growth momentum. But we doubt this marks the start of a decisive rebound in activity. The Caixin manufacturing PMI defied …
2nd December 2019
The slowdown resumes Activity and spending slowed across the board last month, more than reversing the uptick at the end of Q3. With further weakness on the horizon, we think additional policy stimulus is due before long. Growth in industrial production …
14th November 2019
Further stimulus needed Monetary easing is failing to lift bank loan growth, while fiscal constraints are weighing on broader credit expansion. This should increase pressure on the PBOC to loosen policy more decisively. Chinese banks extended RMB 661bn in …
11th November 2019
Shipments improve amid trade deal optimism The contraction in both exports and imports eased more than expected last month. But even if the “Phase One” US-China trade deal crosses the finish line, it is unlikely to alleviate the main headwinds facing …
8th November 2019
Easing capital outflows keep PBOC on the side-lines The official foreign exchange reserves figures suggest that the PBOC continued to refrain from direct FX intervention last month as renminbi depreciation pressure subsided. This points to a decline in …
7th November 2019
The survey data offer conflicting signals A divergence in the official and unofficial PMIs makes it unusually difficult to gauge how the economy performed at the start of Q4. On balance, growth appears to have picked up last month but activity is unlikely …
1st November 2019
Recession to extend into Q4 Hong Kong’s first recession in a decade is shaping up to be deeper than anticipated. And while last quarter will probably mark the trough in q/q growth, the city’s economy will continue to struggle. The city’s GDP contracted …
31st October 2019
A weaker start to Q4 The official PMIs fell by more than expected this month, reinforcing our view that the improvement at the end of Q3 didn’t mark the start of a sustained recovery . The official manufacturing PMI declined from 49.8 in September to an …
A stronger end to a weak quarter An uptick in activity in September didn’t avert a slowdown last quarter. And policy support is unlikely to prevent cooling external demand and slowing construction from resulting in more weakness ahead. GDP growth slowed …
18th October 2019
Stimulus still underwhelming Credit growth failed to pick up in September despite recent policy easing. And while we expect policymakers to take more aggressive action before long, the impact of any easing on credit growth and economic activity will …
15th October 2019
Consumer price inflation hits a five-year high Headline inflation continued accelerating last month but core inflation held stable at a low level. With demand-side pressures on prices set to remain subdued in the coming months, we think that the People’s …
Shipments weak ahead of trade deal The contraction in both exports and imports deepened last month. Import growth should start to recover soon. But with the mini US-China trade deal unlikely to alleviate the main headwinds facing exporters, it will take …
14th October 2019
Outflow pressures remain muted China’s FX reserves declined unexpectedly last month but officials claim this was due to valuation effects and muted outflow pressures suggest that the PBOC will have felt little urgency to run down it reserves. The value of …
7th October 2019
Strong PMIs likely a false dawn China’s manufacturing PMIs jumped this month, indicating that activity got a break from the ongoing slowdown. But this is unlikely to mark the start of a turnaround. There are signs of a slowdown in construction activity, …
30th September 2019
Activity weakens further After worsening across the board in July, growth in industrial production, capital spending and retail sales fell even further last month. And with a strong rebound unlikely any time soon, we anticipate that more policy easing …
16th September 2019
Credit growth holds steady Monetary easing has so far failed to generate much of a pick-up in credit growth, which remained unchanged last month. This should push policymakers to take further action. Chinese banks extended RMB1,210bn in net new local …
11th September 2019
Factory-gate deflation deepens Weakening demand dragged producer price inflation further into negative territory last month while surging pork prices kept consumer price inflation elevated. With demand-side pressures on prices increasingly subdued, we …
10th September 2019
Export growth turned negative again Exports fell last month as global demand softened and US tariffs continued to take their toll. Imports improved thanks to strong infrastructure spending but remain consistent with a further economic slowdown. Meanwhile, …
9th September 2019
Fiscal stimulus taking effect The latest survey data suggest that exports have continued to struggle but that factory activity was propped up by stronger infrastructure spending. The Caixin manufacturing PMI jumped from 49.9 in July to a five-month high …
2nd September 2019
The slowdown resumes After improving in June, economic conditions worsened across the board last month as growth in industrial production, capital spending and retail sales all dropped back. We see more weakness on the horizon. Growth in industrial …
14th August 2019
Credit growth sputters The latest slowdown in lending highlights the need for further monetary easing if policymakers are to succeed in putting a floor beneath growth. Chinese banks extended RMB1,060bn in net new local currency loans in July, down from …
12th August 2019
Factory-gate deflation returns Weakening demand dragged producer price inflation into negative territory last month even as surging pork prices continued to push up consumer price inflation. Both have downbeat implications for the health of China’s …
9th August 2019
Trade picks up but headwinds remain Shipments in and out of China held up better than expected last month, but a sustained turnaround still looks unlikely in the near-term. Export growth picked up from -1.3% y/y in June to 3.3% last month in US dollar …
8th August 2019
The calm before the storm The latest FX reserves figures are consistent with the People’s Bank (PBOC) having remained on the side-lines of the FX market last month. But the relative calm of July will give way to a more eventful August . The value of the …
7th August 2019
Unofficial survey rises but headwinds remain The latest Caixin survey suggests that factory activity remained weak last month but that downward pressure eased somewhat, painting a similar picture to the official manufacturing PMI released yesterday. The …
1st August 2019