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New monetary tool aimed at risk mitigation, not QE Speculation had emerged that the PBOC might start quantitative easing (QE) after it was revealed earlier this month that President Xi Jinping had called on the central bank to increase the buying and …
26th April 2024
GDP breakdown points to stronger services activity The better-than-expected Q1 GDP figures released earlier this week added to wider evidence that the economy has regained some momentum recently. The detailed sectoral breakdown, published a day after the …
19th April 2024
Strong US CPI puts further pressure on the RMB The stronger US CPI print on Wednesday pushed back expectations for Fed rate cuts. Most currencies depreciated against the US dollar as a result. But, while the offshore renminbi weakened 0.4% on Wednesday, …
12th April 2024
PBOC eases auto loan policy to stimulate demand On Wednesday, the PBOC scrapped the regulatory minimum down payment for car loans on all passenger vehicles, giving banks the freedom to offer higher loan-to-value ratios. This latest attempt by the central …
5th April 2024
CEO visits underscore China’s continued appeal President Xi held a rare, highly-publicised meeting in Beijing with a visiting US business delegation this week. The optimistic take is that, facing economic weakness and collapsing FDI, China’s leadership is …
28th March 2024
LGFVs stepping up land purchases Despite the collapse in home sales, construction activity has retreated only modestly in recent years. We think the bulk of the correction has yet to come , with construction activity likely to halve by the end of this …
22nd March 2024
Campaign will boost demand but also supply On Wednesday, the State Council published an action plan to promote the large-scale upgrading of equipment and trading-in of consumer goods. We already discussed the implications of the latter in our previous …
15th March 2024
New Productive Forces, old ideas At the top of the premier’s list of Major Tasks for 2024 in his Work Report is a call to develop “New Productive Forces at a faster pace”. NPF is taking a place alongside “common prosperity” in the lexicon of Xi Jinping …
8th March 2024
Reading the NPC tea leaves China’s legislature will kick off its annual gathering on Tuesday. This typically lasts a week or so. But from the perspective of analysts and investors, the key events are on the first day. These include the delivery of the …
1st March 2024
Funding boost could be large, if banks do their part China’s housing market is still struggling . High frequency data suggest that sales in major cities have ticked up since the start of the year. And price declines eased slightly in January. (See Chart …
23rd February 2024
Dragon years have been middling for economy The world’s largest annual migration of people is well underway, with millions of Chinese returning to their hometowns to spend the Lunar New Year holiday with their families. On Saturday, the Year of the Rabbit …
8th February 2024
TFP touted as key metric for Xi’s new growth model President Xi has spoken a lot in recent years about the need to foster “high-quality development” (HQD). There have been a raft of policy documents and state media editorials attempting to flesh out what …
2nd February 2024
PBOC is pushing on a string The 50bp cut to banks’ required reserve ratio (RRR) announced this week is the largest since 2021 and will free up around RMB1trn of liquidity when it comes into force on 5 th February. The move has improved investor sentiment …
26th January 2024
GDP breakdown points to rebound in tech & retail Officially, GDP growth slowed last quarter in q/q terms. But as we noted in our response to the data, this does not seem consistent with wider evidence of a slight improvement in momentum recently. On …
19th January 2024
Growth pick-up to extend into Q1, fade by year-end The Q4 GDP data due on Wednesday are likely to show that China’s economy ended 2023 on a more positive note. Our GDP tracker points to y/y growth of 5.5%, up from 4.9% in Q3. That partly reflects a weaker …
12th January 2024
PSL injection to provide modest lending boost While bond yields in developed economies have regained some ground this week, the opposite has been the case in China, with the 10Y CGB yield dropping to a near four-year low of 2.52% today. This suggests …
5th January 2024
PBOC moving cautiously to ease further The Loan Prime Rates (LPR) were left unchanged for a fourth consecutive month on Wednesday. But today’s coordinated reductions in commercial bank deposit rates suggest that the PBOC is still on an easing path. Lower …
22nd December 2023
Weak sentiment isn’t the main headwind China’s leadership gathered earlier this week for the Central Economic Work Conference (CEWC), which is held every December to discuss the economic targets and policy settings for the following year. The …
15th December 2023
Faith in the state backstop as strong as ever Earlier this week, Moody’s downgraded the outlook on China’s sovereign credit rating from “stable” to “negative” and made similar changes to its ratings outlook for Chinese banks, local governments and …
8th December 2023
Ramp up in fiscal support yet to be fully felt Government borrowing has been strong ever since the Politburo called for an acceleration in bond issuance at its July meeting. Momentum has been sustained by a rare mid-year increase in the deficit target …
1st December 2023
More credit support for developers in the works Policymakers have been trying, and largely failing, to stabilise the property sector for some time. There was a major step-up in support in September, when downpayment requirements and purchase controls …
24th November 2023
Developers retreating, LGFVs taking their place In remarks published by state media last weekend, China’s housing minister, Ni Hong, discussed plans to alter the country’s real estate development model, shifting the focus from quantity to quality. There …
17th November 2023
Resilience of export volumes unlikely to last China’s exporters are doing better than the headlines suggest. Most analysis focuses on what is happening in y/y terms to export values – they have been contracting for six months. Less widely understood is …
10th November 2023
Over half of cross-border settlement now in RMB Earlier this week, the People’s Bank published its annual report on renminbi internationalisation. The message from the 84-page document is that global use of China’s currency has been gaining momentum …
3rd November 2023
Giving with one hand, taking with the other Earlier this week, China’s legislature increased the government’s planned annual budget deficit from 3.0% of GDP to 3.8%. This was the first mid-year revision since 2008 and only the fifth in the PRC’s history. …
27th October 2023
Q3 acceleration may be statistical mirage The GDP figures published earlier this week were stronger than most had expected . They showed that growth accelerated from 0.5% q/q in Q2 to 1.3% in Q3, an annualised rate of 5.3%. But the official q/q …
20th October 2023
Online briefing about the health of China's economy We'll be online on Wednesday shortly after the release of the September activity and spending data and Q3 GDP. Register here to join us. US export controls about to bite harder The US government is on …
13th October 2023
PBOC not letting its guard down The yield on 10-year US Treasuries surged to a 16-year high this week. We covered the potential implications for the global economy here . But one of the more immediate consequences has been downward pressure on many EM …
6th October 2023
Industrial policy isn't an offset for property downturn Can emerging new industries replace property as a driver of China’s economy? There has been a flurry of discussion in the past couple of weeks in China about whether “new-type industrialisation” …
29th September 2023
Efforts to boost foreign investment are failing In March, the government launched a year-long “Invest in China” campaign to shore up sagging foreign investment. As part of these efforts, it set out 24 measures in August to improve the business environment …
22nd September 2023
Property controls have been substantively relaxed in recent weeks. The big announcements came on the last day of August. But there has since been plenty of easing at the local level too. At least ten large cities have lifted all home purchase …
15th September 2023
Huawei's chip breakthrough The launch of Huawei’s new phone, the Mate 60 Pro, has sparked a debate over the effectiveness of US export controls that were tightened last year, restricting the sale to China of machinery needed to produce sub-18nm chips. The …
8th September 2023
Stimulus efforts are finally gaining momentum. Yesterday, regulators announced measures to support households and shore up the property sector, including looser downpayment requirements and reductions to existing mortgage rates. And today, the state banks …
1st September 2023
Note: We’ll be discussing the China growth/stimulus question, the BOJ’s policy outlook, Indian food price inflation and more in our monthly Asia Drop-In on Thursday, 31 st August . Register here to join the online briefing. Have the leadership given up on …
25th August 2023
But they aren’t as big a systemic threat as some fear In addition to troubles at Country Garden , the big story in China’s credit markets this week was the turmoil at Zhongzhi. Yesterday, the asset manager cum shadow bank acknowledged that it was in a …
18th August 2023
Exports may be weaker than they appear China’s exports fell 14.5% y/y in July, undershooting the analyst consensus. But given the sharp fall in export prices recently, what’s more surprising to us is that export values haven’t fallen even more. On paper, …
11th August 2023
Speeding up bond issuance is a start but not enough Following last week’s dovish Politburo meeting readout, regulators have reportedly told local officials that they have until the end of next month to fully utilize their annual issuance quotas for …
4th August 2023
China’s leadership promises more support The highlight of the week was Monday’s Politburo meeting. Although light on specifics, the readout was dovish in tone and made clear that more policy easing is on its way. While substantial direct support for …
28th July 2023
Regulatory environment is only part of the problem After making life more difficult for many private firms in recent years, officials are shifting course. On Wednesday, a document aimed at promoting the development of the private sector was jointly issued …
21st July 2023
Stronger RMB by year-end The PBOC’s Q2 Monetary Policy Report, published last Friday, included new language pledging to “prevent large fluctuations in the exchange rate”. Then, with the renminbi approaching 7.3/$ at the start of this week, the PBOC pushed …
7th July 2023
PBOC surveys offer clues on propensity to spend… Yesterday, the People’s Bank (PBOC) published the latest results of its quarterly surveys, in which it polls 3,200 banks, 5,000 industrial enterprises and 20,000 households across 50 cities. These offer a …
30th June 2023
Support measures could take time to draw up Hopes for more policy easing intensified last week after the surprise cut to the PBOC’s reverse repo rate and the release of weak activity data for May. Late last Friday, the State Council said that it was …
23rd June 2023
Monetary easing alone won’t suffice Data published this week made it clear that the reopening recovery has stalled. Momentum weakened almost across the board in May, and the labour market began to soften again. Broad credit growth also slowed sharply . …
16th June 2023
Note: We’ll be discussing whether China’s post-zero-COVID recovery is already over in an online briefing at 09:00 BST/16:00 SGT on 15th June . Register now . Property support of limited use in isolation Stocks of Chinese property developers surged …
9th June 2023
Second-round effects from reopening still in play Investors have become increasingly bearish on the outlook for household spending in China. Onshore-listed consumer discretionary stocks have now reversed almost all of their reopening gains and those …
1st June 2023
Slow progress tackling construction backlog New home sales have ticked up since the end of last year, helped by a post-zero-COVID recovery in consumer confidence and large reductions in mortgage rates and down-payment requirements. But the improvement has …
26th May 2023
Chinese government bonds have rallied over the past couple of months, with the 2-year yield falling over 20bps since mid-March. This reflects mounting expectations for monetary easing in response to what has widely been viewed as an underwhelming …
19th May 2023
An underwhelming set of data published over the past week have added to growing concerns about the state of China’s recovery. Imports , inflation and credit all came in below expectations for April. It might seem hard to square this with the more …
12th May 2023
The April PMIs , the last of which was published today, suggest that while the reopening rebound in manufacturing stalled last month, the recovery in services was still going strong. That’s also the takeaway from the five-day Labour Day holiday which …
5th May 2023
Property policy recalibration The Politburo held its monthly meeting today and, as is usual in April, its focus was the economy. The gist of its statement is one we’d agree with: economic growth in the immediate rebound from zero-COVID weakness “has been …
28th April 2023
