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Backing off on tech regulation In a sign that officials are turning less hostile toward tech firms the Politburo last week pledged to “promote the healthy development of the platform economy”. This was followed by similar statements from the PBOC and …
6th May 2022
A strong stimulus-led rebound still looks unlikely The readout from today’s Politburo meeting repeated Xi’s call earlier in the week for all-out efforts to strengthen infrastructure construction. This was framed in the context of medium-term goals to …
29th April 2022
Currency slide will continue The renminbi had been defying the gravitational pull of a collapsing interest rate differential with the dollar. In recent days, something seemed to give. The onshore currency lost 1.8% against the dollar this week. The slide …
22nd April 2022
Economy still reeling from virus disruptions The PMIs pointed to the second-largest contraction in service sector activity on record in March. And the high-frequency data that we track suggest that conditions have deteriorated further so far this month. …
14th April 2022
Property green shoots trampled New homes sales had stabilised around the turn of the year as the regulatory stance turned more supportive for homebuyers from October onwards. Given this policy shift, we had expected sales to rebound before long. But those …
8th April 2022
The number of new COVID cases across China has fallen over the past couple of days led by a sizeable drop in Shanghai. (See Chart 1.) There’s not much to celebrate if you’re in Shanghai though and have just had your lockdown extended. Chart 1: New …
1st April 2022
Current wave yet to be brought under control Daily new domestic virus cases have rebounded over the past week and are now back near the peak of 5,154 hit on 14 th March. This is largely due to mass testing finding hidden infections. 10 days ago, 32% of …
25th March 2022
Liu He’s promise on Wednesday of more market-friendly policies triggered a surge in domestic and offshore Chinese equities along with talk of capitulation on key elements of policy. The market bounce makes sense from a short-term perspective. Liu is the …
18th March 2022
A big test for China’s “dynamic clearing” approach Local COVID-19 infections have surged, with over 1000 new cases reported today, the most since March 2020. There are flare-ups across the country, making containment harder and raising the risk of …
11th March 2022
“Experimental opening” will be limited in scope Media reports over the past few days suggest that officials have begun discussing ways to pivot away from a zero-COVID strategy. We’ve argued for some time that China will transition toward living with the …
4th March 2022
The government will lay out its economic agenda for this year at the annual session of the National People’s Congress (NPC), which kicks off next Saturday. Here are a few pointers on what to expect: Lower growth targets, both explicit and implicit The 14 …
25th February 2022
More policy support for homebuyers Back in November, we made the case that policy support would soon drive a rebound in home sales. Policymakers had signalled a shift to a more supportive stance, initially by telling banks to step-up mortgage lending. And …
18th February 2022
Consumers still holding back Last week we flagged a rise in the number of people travelling during Lunar New Year, which is up 40% compared with a year ago. But data published in recent days suggests this improved mobility has not translated into stronger …
11th February 2022
Hong Kong outbreak pushes back reopening hopes In many countries, Omicron outbreaks have burnt themselves out in weeks and inflicted relatively little economic damage. Hong Kong may be different. The city is wedded to a zero-COVID approach in hope of …
4th February 2022
R&D spending: more is not always better China has made a strong start toward meeting the R&D targets in the 14 th Five Year-Plan (FYP), which are part of the country’s push to become a global leader in cutting-edge technologies. Data published this week …
28th January 2022
Policy easing is putting a floor beneath home sales Official efforts to shore up housing demand continued this week, with a 5bp cut to the 5-year Loan Prime Rate (LPR), the benchmark used by banks to price mortgages. A reduction of this size may seem …
21st January 2022
“Dynamic clearing” hasn’t failed yet It is too soon to conclude – as many seem to have – that Omicron will swamp China’s efforts to suppress COVID. Those efforts are far more forceful than anyone else has tried. The country’s first …
14th January 2022
Virus disruption not as bad as last summer After dropping back close to zero during the second half of November, new local confirmed COVID-19 cases have jumped over the past month or so, reaching an 21-month high of 182 last Monday and staying above 100 …
7th January 2022
It is two years since a cluster of cases of severe pneumonia started to draw attention in Wuhan. Chart 1 maps economic developments in China since then. The blue bars show cumulative growth since late-2019. The black outlines show growth over the …
17th December 2021
Controlled easing The Central Economic Work Conference that we wrote about a week ago concluded today with a statement that called on “all parties to actively launch policies that are conducive to macroeconomic stability.” Whereas July’s RRR cut wasn’t …
10th December 2021
CEWC to discuss policy easing amid slowdown China’s leadership will gather soon for the Central Economic Work Conference (CEWC), an annual meeting that sets economic targets and policy priorities for the coming year. The discussions are private but a …
3rd December 2021
B.1.1.529 and China The median analyst expectation, according to Consensus Economics, is for China’s exports to rise a further 5% next year, when measured in dollars. Some are expecting another double-digit gain. We are the only analysts on the survey …
26th November 2021
Lighter touch succeeds in controlling virus flare-up China’s latest COVID-19 outbreak appears to be coming to an end, with new cases dropping back sharply during the past week. (See Chart 1.) This removes one recent headwind to service sector activity – …
19th November 2021
Developers don’t depend on dollar bonds This week’s surge in yields on dollar bonds is not a good measure of the stress facing Chinese developers. Bonds issued offshore (including in Hong Kong) made up only 9% of outstanding developer debt last quarter . …
12th November 2021
Widening outbreak adds to downside risks China’s latest COVID-19 outbreak worsened this week, with daily cases rising above 100. (See Chart 1.) Cases have now been detected in 20 provinces, threatening widespread disruption as officials across the country …
5th November 2021
China’s currency has strengthened markedly since the middle of 2020. And while its gains against the US dollar have levelled off this year, it has continued to appreciate in trade-weighted terms, recently hitting its strongest level since 2016. Over the …
29th October 2021
We’ll publish our quarterly China Economic Outlook next week. Since the last edition , exports have performed better than we’d expected but this didn’t make up for the disruption caused by measures to contain the Delta variant outbreak in August. That …
22nd October 2021
Just how bad are things? There remains an unusual amount of uncertainty about China’s economic performance in September. The PMIs are less helpful than usual as the surveys were conducted prior to the disruption from power rationing late in the month. …
15th October 2021
One measure of the dislocation of global trade is that container ships with capacity for a million twenty-foot containers are sitting idle off China’s ports. (See the trade data preview below.) The power cuts that began to affect industry at the end of …
8th October 2021
No major pullback in power supply last month Early data suggest that recent electricity rationing may be the result of power companies being unable to keep up with the strength of demand, rather than a substantial pullback in electricity supply. According …
1st October 2021
A matter of time before Evergrande defaults Evergrande failed to pay a $83.5mn coupon on an offshore bond due at noon today in Hong Kong (midnight Thursday in New York). It now has a 30-day grace period to make the payment before the company is in …
24th September 2021
Not just Evergrande Evergrande has been in deep trouble for a long time. But it is fitting that the systemic risks posed by its collapse raised it to the top of global market concerns this week, exactly 13 years after Lehman Brothers’ demise. In the past …
17th September 2021
Gauging the scale of Evergrande credit risks If Evergrande collapses we think that policymakers will seek to protect homebuyers but allow other creditors to take losses. How large might the hit be? The good news is that Evergrande has cut its debt since …
10th September 2021
Taking stock after the summer It’s increasingly hard to keep up. In rough chronological order, during the last three months restrictions have been placed on foreign IPOs; tech firms have been hit with anti-monopoly investigations and legislation, as well …
3rd September 2021
Pandemic boom in home sales unwinding Embattled developer Evergrande this week reported a loss in its core property business during H1, the first time the unit hasn’t turned a profit since the company’s 2009 listing in Hong Kong. The firm said lower …
27th August 2021
August shaping up to be even weaker than July The July activity and spending data published on Monday came in much softer than expected, adding to mounting concerns about China’s growth outlook. The August data look set to be even weaker given that the …
20th August 2021
There are tentative signs that China’s Delta wave has broken. New symptomatic cases have dropped back below 100. And only 52 domestically-transmitted cases were identified yesterday (including non-symptomatic cases found during mass testing). If the …
13th August 2021
The impact of China’s Delta outbreak is starting to show up in the high frequency activity data. (See Chart 1.) The jolt is still smaller than January’s but it will get bigger since restrictions on movement are still being tightened. Chart 1: Passenger …
6th August 2021
China’s impressive record of staunching COVID-19 outbreaks is being tested by the Delta variant . The flare-up that was first identified in Nanjing last week has now spread to 15 other cities, making it the most geographically dispersed since the initial …
30th July 2021
From bad to worse Evergrande is being pummelled again. Over the weekend it came to light that one of the developer’s deposit accounts had been frozen by court order in a dispute with Guangfa Bank. Then on Monday, Shaoyang city authorities revealed they …
23rd July 2021
Cyclically healthy, structurally ailing China’s post-lockdown recovery has often been called patchy, with household spending still weak. We’ve never been entirely comfortable with that characterisation. Retail spending on goods has been back near the …
16th July 2021
Tech crackdown goes to New York… Decoupling has entered a new phase over the past year. Where China previously was trying to temper US efforts to decouple, in key areas it now appears to want the same. The Five-Year Plan’s push for self-sufficiency in …
9th July 2021
Xi sounding antagonistic China’s Communist Party, much like Britain’s monarch, has an official birthday (1 st July) that is different from its actual date of birth (23 rd July 1921). The centrepiece of yesterday’s official centenary was a forthright …
2nd July 2021
China’s export boom may have peaked A surge in demand for Chinese goods has stretched global shipping capacity, leading to bottlenecks at Chinese ports and a jump in container freight rates. A flare-up in COVID-19 cases in southern China earlier this …
25th June 2021
Producer prices may have peaked Factory-gate inflation hit a 12-year high of 9% y/y last month but there are signs that price pressures are now easing again. Weekly figures suggest that producer prices have dropped back from a late-May peak by the most …
18th June 2021
US takes a leaf out of China’s policy playbook The big news this week was that the passage of the US Innovation and Competition Act (USICA) by the Senate. The bill earmarks $190bn in federal funding over the coming five years (albeit not all of it new) …
11th June 2021
Financial support unlikely to trigger baby boom The big news this week was that couples in China will soon be allowed to have three children, up from two currently. We covered the initial announcement here , noting that since the shift from a one-child …
4th June 2021
Renminbi turning point deferred Regulators pledged to squeeze speculation out of domestic commodity markets last week. This week it was the turn of the foreign exchange market. A number of local analysts and researchers in recent weeks have called for …
28th May 2021
Over half of global jabs now happening in China Of the 177 million COVID-19 vaccine doses injected globally during the past week, a staggering 95 million have been in China. That’s not just a function of China’s population size. As we predicted would …
21st May 2021
In its Q1 Monetary Policy Report published on Tuesday, the People’s Bank (PBOC) argued that inflationary pressures are likely to remain modest within China. The authors acknowledged that strong demand as well as supply shortages are driving rapid gains in …
14th May 2021