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A Biden presidency won’t reverse the tide of US-China decoupling and could lead to economic strains on new fronts if climate change and human rights become greater US priorities. While some ballots are still being counted and the composition of the US …
6th November 2020
The detailed breakdown of China’s Q3 GDP data published today shows that the recovery within the service sector remains highly uneven. Encouragingly though, all types of services activity showed a clear improvement, especially among the sectors hardest …
20th October 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. With the PBOC appearing reluctant to keep monetary policy loose for longer than needed amid a broadening economic recovery, we think the next move in the LPR will be an increase early next …
Commercial banks left the Loan Prime Rate (LPR) on hold today. With the economy now largely back to its pre-virus path and the PBOC appearing reluctant to keep monetary policy loose for longer than needed, we think the next move in the LPR will be an …
21st September 2020
The renminbi has risen 5% against the US dollar since May, to its strongest since early 2019. And with China on course for a more pronounced recovery than elsewhere, its external position the strongest in a decade, and onshore yields unusually attractive …
17th September 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. Given signs that the focus of monetary policy has shifted to containing financial risks on the back of the relatively rapid economic recovery, we think the LPR will be unchanged for the …
20th August 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. Further rate cuts seem increasingly unlikely as the focus of monetary policy appears to be shifting from stimulating activity to containing financial risks. The one-year rate was unchanged at …
20th July 2020
The detailed breakdown of China’s Q2 GDP data published today raises some questions about the purported speed of the recovery. Generally though, it is consistent with broader evidence of a sharp rebound, led by industry and construction. Conditions in the …
17th July 2020
Commercial banks left the Loan Prime Rate (LPR) on hold today. We may see a cut or two next quarter but most signs suggest that the bulk of monetary easing this cycle has already taken place. The one-year rate was unchanged at 3.85% (the Bloomberg …
22nd June 2020
We were already expecting China’s economy to return to its pre-virus path faster than other major economies and sooner than most forecasters anticipate. But with output already back to year-ago levels, an even swifter recovery now looks likely. Since we …
16th June 2020
The move by China’s National People’s Congress (NPC) to impose a new security law on Hong Kong effectively overrides the “one country, two systems” framework that has allowed Hong Kong to prosper since 1997. The move will probably trigger protests and …
22nd May 2020
This Update summarises the key announcements from the National People's Congress. For in depth analysis, see this Focus . We had anticipated that the National People’s Congress (NPC) would lay out plans for a further ramp up in policy support and it did …
Commercial banks left the Loan Prime Rate (LPR) on hold today. But the dovish tone of the PBOC’s latest monetary policy report and growing pressure on the central bank to do more, including calls for QE, suggest that this is a pause in, rather than an end …
20th May 2020
PBOC continues to align its policy rates This Update was originally sent to clients as a Rapid Response immediately after the Targeted Medium-term Lending Facility was cut on 24 th April 2020. The People’s Bank (PBOC) has cut rates on yet another one of …
24th April 2020
The detailed breakdown of China’s Q1 GDP data that was published over the weekend shouldn’t be taken completely at face value. But it still provides a useful framework for gauging the relative performance of different sectors amid the COVID-19 disruption. …
20th April 2020
Commercial banks lowered the Loan Prime Rate (LPR) today in response to last week’s policy rate cut. With economic conditions still weak, we expect further rate declines in the coming months. The one-year rate fell from 4.05% to 3.85% (both the Bloomberg …
The People’s Bank (PBOC) has taken yet another step to help banks and borrowers weather the ongoing economic weakness and is preparing to lower interest rates further in the coming months. The PBOC has just cut the one-year rate at which it lends to banks …
15th April 2020
The economic recovery underway in China gives some useful pointers to what lies ahead for the rest of the world. An initial increase in activity can happen rapidly once lockdown measures are eased. But this will soon run into constraints resulting from …
2nd April 2020
The People’s Bank (PBOC) has taken another step to loosen monetary conditions by lowering the rate at which it lends to banks. But the central bank’s job isn’t done yet and we anticipate continued efforts to reduce bank funding costs in the coming months. …
30th March 2020
On current trends the extreme shock to China’s economic output caused by official closing of workplaces and limits on movement will mostly have ended by mid-April. But firm closures and job losses, lingering nervousness among consumers, and the deepening …
24th March 2020
Commercial banks unexpectedly did not lower the Loan Prime Rate (LPR) today. Despite this, monetary conditions are still easing as the People’s Bank (PBOC) has been using a broad set of instruments to ensure that credit keeps flowing despite disruptions …
20th March 2020
The latest data point to a 20% q/q contraction in GDP this quarter (-16% y/y), even on the official figures. Given the shock to incomes and employment, the continued concern about the threat of further infections within China, and the growing disruption …
18th March 2020
The People’s Bank has taken another step to push down borrowing costs. China’s economy is still operating far below its normal capacity but, with only eight new infections reported nationally in the latest daily figures, the central government is now …
13th March 2020
Some countries have managed to control the new coronavirus without large-scale quarantines or economic shutdowns. But they have achieved this by preventing the virus from spreading within the community in the first place. The only places that have so far …
11th March 2020
As the world’s largest oil importer, China stands to gain from the recent fall in oil prices. But the boost to growth will be modest and won’t make up for the hit to Chinese exports from weaker global demand. Oil prices have fallen 20% this week, bringing …
10th March 2020
China is easing monetary policy and lining up fiscal stimulus measures worth at least 2% of GDP. The impact will be muted as long as the workforce is still facing major disruption. But these measures should help restore output to a normal level in the …
5th March 2020
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
With normal activity taking longer to recover than seemed likely earlier this month, we now think that China’s economy will contract outright in year-on-year terms this quarter, for the first time since at least the 1990s. The leadership appears to be …
26th February 2020
The 2020-2021 budget that the Hong Kong government announced earlier today is large in scale and should help offset the damage that the coronavirus outbreak is having on companies and consumers. But there is little the government can do to address the …
Commercial banks cut the Loan Prime Rate (LPR) today in response to moves by the People's Bank earlier in the month to lower their funding costs. While more easing is likely in the coming weeks, this alone won’t change the fortunes of the millions of …
20th February 2020
The vast majority of firms in China have enough funds to keep paying their creditors and employees for at least a couple of months amid the disruptions caused by the coronavirus outbreak. But a minority are already having to lay off workers and job losses …
19th February 2020
The People’s Bank (PBOC) has taken yet another step to help banks and borrowers weather the economic disruption from the coronavirus outbreak. But more easing will probably be needed. The PBOC has just cut the one-year rate at which it lends to banks via …
17th February 2020
A jump in reported cases and deaths appears to reflect the official figures getting a better grip on the true extent of past infections, rather than indicate a recent acceleration in the spread of the virus. If anything, the latest data continue to hint …
13th February 2020
Efforts to contain the virus are becoming less draconian but with many factories struggling to re-open and households not spending, it will be a while before the drag on growth fades. Reuters reported today that President Xi warned officials last week not …
11th February 2020
Policymakers have loosened both monetary and fiscal policy in an effort to soften the economic blow from the coronavirus. Further easing is likely in the coming weeks. But if the virus peaks soon then activity may rebound quickly, with stimulus now coming …
6th February 2020
Data due in the next week or so should give a better sense of how badly economic activity has been hit by the outbreak. And given the incubation period of the virus, the effectiveness of the containment efforts will also start to become clearer, providing …
4th February 2020
The People’s Bank has lowered the rates it charges banks for short-run liquidity. Given the mounting toll of the Coronavirus outbreak, we expect more cuts in the coming months. The People’s Bank (PBOC) has just cut its 7-day reverse repo to 2.40% from …
3rd February 2020
Even if the coronavirus outbreak is brought under control quicker than SARS was in 2003, the economic impact now looks likely to be of at least a similar scale. We estimate that SARS lowered China’s growth by three percentage points in the worst-affected …
27th January 2020
Fears are growing about the spread of a newly-identified coronavirus across Asia. In this Update we discuss the likely implications for the region’s economies. Stock markets across the region fell today as fears over the spread of the virus escalated. It …
21st January 2020
PBOC on hold, for now The Loan Prime Rate (LPR) was unchanged in January. The one-year rate remained at 4.15% (both the Bloomberg consensus and our forecast was 4.10%), and the five-year rate stayed at 4.80%. The LPR replaced the PBOC’s traditional …
20th January 2020
This Update was originally sent to clients as a Rapid Response immediately after the announcement by the PBOC. The Loan Prime Rate (LPR), the reference point against which banks now price loans, held steady in December. The one-year LPR was unchanged at …
20th December 2019
The People’s Bank has made another small downward adjustment to the rates it charges banks for short-run liquidity. We expect further cuts in the coming months, which will open the door to lower interbank rates and encourage banks to cut lending rates . …
18th December 2019
Domestic headwinds will continue to weigh on growth next year, even as the external environment starts to improve. We expect this to trigger additional policy easing, with the PBOC likely to cut rates by more than most anticipate and allow the renminbi to …
12th December 2019
The latest Loan Prime Rate (LPR) reductions confirm that banks are lowering lending rates on new loans in response to the recent cuts to the PBOC’s lending facilities. And policymakers’ willingness to embrace lower rates on long-term loans hints at a …
20th November 2019
For the first time this easing cycle, the People’s Bank has cut the rate it charges banks for short-run liquidity. We expect further cuts in the coming months, which will open the door to lower interbank rates and make banks less reluctant to cut lending …
18th November 2019
If Hong Kong’s special treatment under US law were revoked, the city would lose access to sensitive US technology and face an increased threat of US tariffs. The short-term economic damage would be manageable, but it would accelerate the erosion of Hong …
11th November 2019
The People’s Bank is powerless to stop consumer price inflation jumping above its target without undermining its broader mandate to support growth and employment. Given this trade-off we expect the central bank to prioritise the latter and ease monetary …
After keeping interbank rates broadly stable for most of this year, the People’s Bank (PBOC) is starting to take more direct steps to push down borrowing costs. We think this could mark the beginning of a series of PBOC rate cuts. Today, the PBOC cut the …
5th November 2019
The detailed breakdown of China’s Q3 GDP data released today shows that a slowdown in industry overshadowed strength in the construction sector. The headwinds to the construction sector should only get stronger in the coming quarters. GDP growth edged …
21st October 2019
The newly-revamped Loan Prime Rate (LPR), the reference point against which banks now price loans, was unchanged in October. This will only increase pressure on the PBOC to ease funding costs for banks in the coming months. The one-year LPR was unchanged …