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While EM policymakers haven’t raised concerns about Chinese overcapacity in the same way that their counterparts in the US and Europe have, they too are facing widening trade deficits with China. We suspect EMs will be less likely than DMs to turn to …
24th April 2024
The rapid expansion in China’s manufacturing capacity of green technology is a symptom of the country’s investment-led growth model and so there is no reason to believe that any change in tack is imminent. Against this backdrop, western governments will …
23rd April 2024
A week spent visiting client s, contacts and friends in Beijing and Shanghai has underlined the extent of the pessimistic shift in sentiment within China. At first glance, China’s economy is doing fine . The streets of Beijing and Shanghai are bustling …
This report was first published on Monday 1 st April covering the official PMIs and the Caixin manufacturing PMI. We added commentary on the Caixin services and composite PMIs on Wednesday 3 rd April. More signs of a cyclical upturn Sizeable rises in the …
1st April 2024
We continue to think that policymakers in China and Japan will do enough to keep their currencies from weakening much further, but the risk of a break lower in one, or both, is increasing. Push-back from the authorities in China and Japan has stabilised …
27th March 2024
“New Three” Chinese exports = must-watch data …
14th March 2024
Out of negative territory but set to remain low CPI inflation turned positive last month for the first time since September, thanks to temporary factors such as the volatility in food and tourism prices around Lunar New Year. But persistent overcapacity …
11th March 2024
Today’s budget maintains a supportive fiscal stance, and contains major steps to revitalise the property sector. Spending to attract foreign visitors to Hong Kong and support businesses was stepped up too. Taken together, these measures should prevent the …
28th February 2024
The People’s Bank’s policy announcements today will provide only a small boost for China’s economy. Meaningful improvements in household or corporate borrowing would require substantial rate cuts or a significant change in economic sentiment. Neither …
24th January 2024
We project decent near-term gains in China’s equities, think long-dated CGB yields will finish the year around their current levels, and expect the renminbi to rally against the US dollar. China’s equity, bond, and FX markets were on the back foot …
19th January 2024
Note: Join our post-Taiwan election online briefing on Monday, 15th January to find out what the results mean for its economy and for US-China relations. Register here for the 20-minute session. China may respond to a victory for Tsai Ing-wen’s chosen …
10th January 2024
While equities in China might make up some lost ground over the next few months relative to those in India, we suspect they’ll underperform over the longer term. In the fifteen years or so that preceded the COVID-19 pandemic, equities in China and India …
4th January 2024
This report was first published on Tuesday 2 nd January, covering the official PMIs and Caixin manufacturing PMI. We added commentary on the Caixin services and composite PMIs on Thursday 4 th January. Rebound led by services and construction The official …
2nd January 2024
In this Global Economics Update , we describe eight of the biggest risks to our economic forecasts for 2024. The unusual nature of this cycle and uncertainties surrounding the transmission of monetary policy mean that the biggest risks relate to central …
30th November 2023
This page was first published on Thursday 30 th November, covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Friday 1 st December , and the Caixin services and composite PMI on Tuesday 5 th December. Reality may not be as …
In much of the world, interest rates are likely to settle at higher levels than was the case prior to the pandemic. But China is a key exception, with its shrinking population, slowing productivity gains, low inflation rate and increasingly-heavy debt …
29th November 2023
China’s leadership has outlined its wish list for financial sector development. It wants stricter oversight of financial institutions to ensure they serve the interests of the Party and country. This includes providing greater credit support to …
1st November 2023
This page was first published on Tuesday 31 st October, covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Wednesday 1 st November, and the Caixin services and composite PMI on Friday 3 rd November. Note: We discussed h …
31st October 2023
Foreign direct investment into China, as measured by the balance of payments data, has collapsed. It is tempting to pin this on global fragmentation or a loss of confidence in China’s economic prospects. But the key driver appears to be more prosaic: the …
30th October 2023
The additional fiscal support approved today is the intervention we had been expecting and that was needed to prevent an abrupt fiscal tightening in China in the closing weeks of the year. Fiscal policy has been a prop to growth in China over the last few …
24th October 2023
We think both the recent outperformance of China’s sovereign bonds relative to those in the US and the underperformance of its equities will end – and may even reverse somewhat – in the near future. Chinese government bonds (CGBs) have largely been spared …
20th October 2023
An increase in lending to other parts of China’s economy has provided a counter-balance to the slump in in credit demand that was triggered by the property crisis, but it is still only a partial one. That’s not the impression given by a chart that has …
12th October 2023
China’s recent commodity demand has been stronger than might have been expected given the weakness of its economy and commodity-intensive property sector in particular. This partly reflects a step-up in infrastructure spending and resilience in …
The Asian Tiger economies of Korea, Singapore, Hong Kong and Taiwan are likely to be among the biggest beneficiaries of the emergence of new AI technologies. But the boost will not be enough to offset the drag from worsening demographics, and we still …
9th October 2023
The sell-off in bond markets has taken a breather today, helped in part by softer data on the US labour market. However, the scale of the moves over the past week has invoked comparisons to previous financial crises that have been caused by sharp moves in …
4th October 2023
Falls in the value of China’s recorded holdings of US Treasuries tell us little about whether China is divesting from the dollar. A broader look at the data suggests that it isn’t, despite geopolitical pressure to decouple. And while we don’t have timely …
Policy support should drive a turnaround The PMI surveys suggest another month of stable economic activity in September. A continued acceleration in construction activity appears to have offset a further softening in services activity. Meanwhile, …
2nd October 2023
This is an excerpt from our CE Spotlight series on AI. The whole series can be viewed here . A year ago, China was widely held to be a – perhaps the – global leader in AI. It has an online population larger than the US and Europe combined. Ubiquitous …
26th September 2023
While policymakers’ efforts to prop up the renminbi and the yen alone are not enough to generate a lasting turnaround , they will probably do enough to buy time until US interest rate expectations and Treasury yields fall back and the dollar depreciates …
15th September 2023
The quantitative tools that the PBOC relied on to pump up credit growth during previous downturns have become ineffective due to weak demand. That leaves interest rates as the main avenue for monetary support. But bank lending rates need to decline to a …
11th September 2023
Disinflationary pressures easing CPI exited deflation in August, and PPI rose for the first time in nine months. Core inflation remained unchanged after hitting a 11-month high in July, while services inflation rose to its highest in 18 months. We expect …
This page was first published on Thursday 31 st July, covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Friday 1 st September , and Caixin Services and Composite PMIs on Tuesday 5 th September. Note: We discussed the China …
31st August 2023
With the headwinds growing for China’s economy, we think its equity markets will struggle, its 10-year yield will continue to fall and its currency won’t rebound as quickly as we’d thought. At the start of the year China’s economy was powering ahead. But …
17th August 2023
China’s economy has stalled recently and headwinds are still intensifying on multiple fronts. The lack of a stronger stimulus response partly reflects a greater tolerance for economic weakness. But it also points to a worrying degree of policy paralysis, …
Note: We’ll be discussing the economic and financial risks facing China’s economy, and their implications for global markets, in an online briefing on Thursday, 17th August. Register here to join. Financial problems at Country Garden, once considered …
16th August 2023
This page was first published on Tuesday 15 th August, covering the reduction to the Medium-term Lending Facility rate. We added commentary following the cut to the 1-year Loan Prime Rate on Monday 21 st August. LPR follow-up disappoints after largest MLF …
15th August 2023
Consumer price inflation slipped into negative territory in July. But this probably won’t last more than a quarter or two and has less to do with the health of domestic demand than many think. Inflation in services, the part of the CPI basket most …
11th August 2023
The property downturn has left state-owned developers the dominant players in a previously privately-led sector. The state is likely to continue playing a larger role as consolidation continues around more financially-secure firms. Based on a sample of …
3rd August 2023
We estimate that China’s trend rate of growth has slowed from 5.0% in 2019 to 3.0% now, based on our China Activity Proxy. This is a steeper deceleration than in the years leading up to the emergence of COVID-19. The official GDP data, while not fully …
2nd August 2023
This page was first published on Monday 31st July, covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Tuesday 1st August, and the Caixin services and composite PMI on Thursday 3rd August. Construction downturn deepens The …
31st July 2023
China is not suffering a balance sheet recession: most private firms are not highly indebted and would borrow if they had more confidence in the economic outlook. But there are other parallels with Japan’s circumstances in the 1990s that point to …
24th July 2023
Recent measures have been sector-specific Policymakers have been taking further steps to support the economy this week. But efforts are being directed at struggling sectors rather than the wider economy through broad stimulus measures. The PBOC and …
14th July 2023
China has stepped up its support of the renminbi and Japan appears to be edging closer to direct intervention to prop up the yen. While pressure from higher US interest rates may well continue in the short term, we think that both currencies will rebound …
7th July 2023
Challenges to China’s long-run growth potential that were mounting a few years ago are now evident to all. We continue to expect trend growth to have fallen to around 2% in 2030. We held an online drop-in yesterday to discuss how our views on China’s …
26th May 2023
Over the past couple of weeks we have held a series of roundtable discussions with clients across Asia and North America on the outlook for EMs. In this Update we provide our thoughts on the recurring questions that we received, including on China’s …
19th May 2023
The idea of a new BRICS currency to settle trade or hold in reserves instead of the dollar has been doing the rounds recently. This could be modelled on the IMF’s Special Drawing Rights. But getting India on board with China would be difficult. And if the …
4th May 2023
While the Credit Suisse rescue might draw a line under that particular institution’s problems, it is clear that confidence in the financial sector overall is still extremely fragile. So regardless of whether more financial institutions run into trouble, …
20th March 2023
The People’s Bank (PBOC) has just announced a cut to the required reserve ratio (RRR). This will provide a bit of financial relief for China’s large and medium-sized banks. It may also help nudge down lending rates slightly. But given the wider signs of …
17th March 2023
A key channel through which emerging markets could be affected by the strains in the global banking sector is if lending by foreign banks falls sharply. On this front, EMs’ vulnerabilities have eased since the Global Financial Crisis. But there are still …
16th March 2023
At the time of writing, financial markets appear to be stabilising after the turmoil caused by the collapse of SVB. And it doesn’t look like EMs have suffered large capital outflows or strains in their banking sectors. If this relatively benign scenario …
14th March 2023