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China made none of the additional purchases it committed to under the Phase One trade deal. The Biden administration isn’t pleased but doesn’t have good options to force China to do more. And China has less incentive to offer concessions than it did a …
10th February 2022
Today’s reductions to both the one-year and five-year Loan Prime Rates (LPR) continue the PBOC’s efforts to push down borrowing costs. We expect additional easing to follow in the coming months, including measures to push down deposit rates. But …
20th January 2022
The People’s Bank (PBOC) has stepped up its efforts to loosen monetary conditions, following up last month’s reduction to the Loan Prime Rate (LPR) with cuts to the rates at which it lends to banks. Another LPR cut this month is now a given and we expect …
17th January 2022
China’s currency was remarkably stable against the US dollar in 2021 and appreciated against other major currencies. But we doubt that trend will continue this year: a slowing economy, monetary policy easing, and a gradual normalisation of China’s current …
13th January 2022
The amount of residential floor space being built in China hit a record last year. With new project starts dropping sharply recently, the government has now unveiled plans to ramp up construction of low-cost rental housing. But this won’t offset the …
Korea, the Philippines and India are each holding elections this year that will play a role in setting fiscal and structural reform priorities, including the possible introduction of a universal basic income in Korea. And China looks set to tear up the …
10th January 2022
2022 will be a year of slower growth in China as the property and export sectors weaken and structural constraints loom larger. A desire to keep a grip on credit risks will inhibit the policy response to the slowdown. Xi Jinping’s decision not to step …
5th January 2022
The People’s Bank has taken another modest easing step with a 5bp reduction to the One-Year Loan Prime Rate, although it kept the Five-Year rate on hold. We expect more easing to follow in the coming months. The one-year rate decreased from 3.85% to …
20th December 2021
The People’s Bank (PBOC) has just announced a cut to the required reserve ratio (RRR) for most banks, shortly after Premier Li and the Politburo each separately hinted at an increase in policy support. There is already evidence of fiscal easing, and we …
6th December 2021
The Loan Prime Rate (LPR) remained unchanged for the 19th consecutive month today. But officials are already easing policy in other ways, such as by relaxing constraints on mortgage lending. The PBOC has also pushed down bank funding costs via recent …
22nd November 2021
New home sales have dropped by a fifth since March, a similar-sized slump to those seen during the previous two housing downturns. With policy now turning more supportive, high-frequency data suggest that sales are bottoming out and a cyclical rebound …
19th November 2021
The Loan Prime Rate (LPR) remained on hold for the 18th straight month today. And investors have recently pared back their expectations for monetary easing. But given growing economic strains, especially in the property sector, we still think the PBOC …
20th October 2021
Local governments in China are far less reliant on land sales as a source of revenue than is often claimed. While slowing real estate development will create a funding gap, it could be more than offset with a modest property tax. It’s a common refrain …
5th October 2021
China’s power shortages are a reflection of the global strain in energy markets and won’t be resolved overnight. Power rationing will constrain industrial activity until demand weakens enough to bring the domestic electricity market back into equilibrium. …
29th September 2021
We think that the renminbi’s period of remarkable calm will end before long, and that it will depreciate against the US dollar over the next few months. This year, the USD/CNY exchange rate has not traded more than ~2% away from where it was at the start …
24th September 2021
If, contrary to our opinion and the consensus, a collapse of Evergrande ends up having a significant impact on the rest of the world, it will be because it first causes either major financial dislocation within China or a property-led slump in China’s …
22nd September 2021
With a couple of exceptions, most major developers are in a much stronger financial position than Evergrande and should be able to weather a temporary spike in their borrowing costs amid contagion fears. Successfully navigating the structural decline in …
If Evergrande were to cause a financial or economic shock it would either be because policymakers failed to contain financial contagion or because the company’s collapse precipitated a much bigger decline in construction activity than most investors …
Commercial banks left the Loan Prime Rate (LPR) on hold for a 17th consecutive month today. But with the economy losing steam and concerns around the property sector growing, we think policy rate cuts by the PBOC could come as soon as next month. The …
The root of Evergrande’s troubles – and those of other highly-leveraged developers – is that residential property demand in China is entering an era of sustained decline. Relaxation of regulatory controls on the sector wouldn’t change this fundamental …
15th September 2021
Evergrande’s collapse would be the biggest test that China’s financial system has faced in years. Policymakers’ main priority would be the households that have handed over deposits for properties that haven’t yet been finished. The company’s other …
9th September 2021
Commercial banks left the Loan Prime Rate (LPR) on hold for a 16th straight month today. But with the economy losing momentum, we think it won’t be long before the PBOC is guiding rates lower. Even so, another round of large-scale credit-led stimulus …
20th August 2021
China’s leadership has signalled a growing focus on reducing inequality. This could boost the productivity of low-income households and speed up the long-touted rebalancing toward consumption. But, if taken too far, it risks dampening the competitive …
19th August 2021
The slowdown that we anticipate in China over the next 6-12 months is best viewed as a return to normality following a period of above-trend output. While it will be a headwind to growth in some industrial commodity producers, we do not think it will …
23rd July 2021
The People’s Bank (PBOC) has just announced a 50 basis point cut to the required reserve ratio (RRR) for most banks. This is less of a lurch towards monetary easing than it might seem at first glance – it is partly intended to offset tightening elsewhere. …
9th July 2021
Revisions to the historic data following the recent census show that China’s population barely grew last year and that employment is already contracting faster than previously understood, having peaked in 2014 rather than 2017. The silver-lining, however, …
24th June 2021
Commercial banks left the Loan Prime Rate (LPR) on hold again today. The PBOC has now fully reversed last year’s credit acceleration using quantitative controls. Accordingly, policy rate hikes that could prompt LPR increases are unlikely in the near …
21st June 2021
By September, China could be in a position to export 340mn vaccines doses each month – more than most regions of the world have administered in total so far. China’s vaccines are less effective than others, but have been found to suppress outbreaks where …
17th June 2021
In the short-run, China has no choice but to grit its teeth and keep buying Australian iron ore, even as bilateral ties continue to fray . But this dependence will diminish over time thanks to increased supply from other sources, greater use of recycled …
26th May 2021
Commercial banks left the Loan Prime Rate (LPR) unchanged for the 13 th consecutive month today. Official goals for reining in credit have already been achieved by other means. As such, we do not expect any changes to policy rates in the coming months. …
20th May 2021
After a month-long delay, the key results from China’s once-a-decade census were published today. They weren’t as bad earlier media reports had suggested – the population continued to rise at much the same pace last decade as it did in the 2000s and, if …
11th May 2021
China’s census has revealed the first population decline since the Great Leap Forward, according to the FT. If this is confirmed and the beginning of a trend, China’s challenge in sustaining rapid long-run economic growth has become even harder. While …
27th April 2021
Commercial banks left the Loan Prime Rate (LPR) on hold today. Given that official efforts to rein in credit are being achieved by other means, we do not expect any changes to policy rates in the coming months. The one-year LPR was unchanged at 3.85% …
20th April 2021
The renminbi has gained 9% against the US dollar since last May. But the factors that underpinned this appreciation have faded. With US yields moving in the dollar’s favour and China’s economic outperformance set to diminish, we now expect the renminbi to …
26th March 2021
China’s statutory retirement ages are low. Raising them, as the Five-Year Plan proposes, would make the pension system more affordable but it wouldn’t make an appreciable difference to the ongoing decline in the size of the workforce. Most older workers …
23rd March 2021
Commercial banks left the Loan Prime Rate (LPR) unchanged today. We have been forecasting the PBOC to hike rates this year but the likelihood of that is diminishing – the PBOC appears to favour quantitative controls on lending instead. Either way, credit …
22nd March 2021
The 14 th Five-Year Plan makes clear that self-sufficiency has grown as a priority for China’s leadership. But it is light on specifics. The details will probably be fleshed out in the raft of industry-level plans that usually follow its publication. But …
19th March 2021
The reports delivered at today’s opening of the National People’s Congress (NPC) confirm that with the COVID-19 downturn now in the rear-view mirror the focus of China’s leadership has shifted away from shoring up near-term growth towards putting the …
5th March 2021
The 14 th Five-Year Plan should provide a revealing view of the key challenges that China’s leadership believes it faces. High among them is a more hostile global environment. In the economic sphere, this will be reflected in calls to raise …
3rd March 2021
Hong Kong has curtailed some of last year’s emergency spending but today’s budget signals that fiscal policy remains loose. There is room to do more, but the key determinant of the economic outlook is not in the financial secretary’s remit: it hinges on …
24th February 2021
Commercial banks left the Loan Prime Rate (LPR) unchanged on Saturday. But monetary conditions have tightened in practice since the start of the year. We expect the PBOC to formalise the shift with policy rate increases in the next few months. The …
22nd February 2021
Our long-run forecasts suggest that China will still be the second largest economy, measured at market exchange rates, in 2050. The most likely scenario is that slowing productivity growth and a shrinking workforce prevent China ever passing the US. But …
18th February 2021
New restrictions on travel will disrupt Lunar New Year plans for many families in China but they should also reduce the disruption to manufacturing and construction that normally causes output to slump in the first quarter of the year. The new government …
27th January 2021
Commercial banks left the Loan Prime Rate (LPR) on hold today. But with monetary conditions already being tightened in practice and underlying inflation set to rebound, we think it is still likely that the PBOC opts to formally hike rates later this year. …
20th January 2021
The detailed breakdown of China’s Q4 GDP data published today shows that the services sector, which had been lagging construction and industry, has returned to its pre-virus growth path, with all types of services activity now expanding in year-on-year …
19th January 2021
The share of bank loans flowing to the property sector has doubled during the past 15 years. But new restrictions are likely to put an end to this upward trend. Coupled with broader limits on developer debt introduced last year, the scene is set for a …
8th January 2021
Commercial banks left the Loan Prime Rate (LPR) on hold today. But with China’s leadership eyeing a gradual withdrawal of policy support, we think the PBOC will start to hike its policy rates next year. The one-year LPR was unchanged at 3.85% (both the …
21st December 2020
China’s rebound from the COVID-19 shock has been swifter and stronger than most anticipated. We think its economy will continue to surprise to the upside for a while, paving the way for PBOC rate hikes and further renminbi appreciation. But the property …
4th December 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today, after the PBOC moved to mitigate the impact of corporate bond defaults on interbank liquidity. With growth now back to its pre-virus path and attention turning to financial risks, we think the …
20th November 2020
Talks to establish the world’s biggest free-trade agreement, the Regional Comprehensive Economic Partnership (RCEP), are finally expected to conclude at the weekend. While a deal would provide a boost to sentiment, the direct economic benefits would be …
12th November 2020