Filtered by Subscriptions: China Economics Use setting China Economics
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
A turn in the credit cycle Broad credit growth edged up for the first time in nine months in November. Given increased policy support we think the recent slowdown in lending has come to an end. But we think officials will seek to avoid a sharp rebound in …
9th December 2021
Food aside, price pressures are easing Consumer price inflation rose above 2% for the first time in over a year last month. But this was almost entirely due to food prices. Core inflation remains subdued and producer prices have levelled off. CPI rose …
Shipments strengthen but Omicron injects uncertainty Exports and imports beat expectations last month thanks to stronger demand and easing semiconductor shortages. In the near-term, the emergence of the Omicron variant is likely to support demand for …
7th 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
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
Industry improves but rebound likely to prove temporary The Caixin manufacturing index published today slipped under 50 last month on the back of softer domestic demand. This contrasts with the official survey released yesterday. Taken together, the …
1st December 2021
Easing power shortages provide temporary boost to industry The official PMIs suggest that industrial activity rebounded this month thanks to easing disruptions from power shortages while a renewed virus flare-up held back the recovery in services. And …
30th November 2021
The global spread of a more transmissible COVID variant is a particular challenge for a country trying to remain COVID-free. But after nearly two years of success suppressing infections domestically (see Chart 1), the bar to changing course before better …
29th November 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
Our China Activity Proxy (CAP) shows that growth ticked up last month as energy shortages eased and the service sector continued to recover from virus disruptions over the summer. But the rebound remains lacklustre, with output still well below June’s …
24th November 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
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
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 …
Disruption in industry eases as energy shortages dissipate Industrial growth rebounded last month as energy shortages eased. But this pick-up is likely to be short-lived given the deepening downturn in property construction. And while retail sales also …
15th 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
Slowdown in credit growth may be over Broad credit growth levelled off in October having previously decelerated to its slowest pace since December 2005. There are some signs that PBOC policy is turning more supportive in response to strains in the …
10th November 2021
Factory gate inflation reaches another high Producer price inflation continued to surge and reached a new high last month. But this largely reflects temporary disruption in a handful of industries from energy shortages, which are already easing. There are …
Strength in exports persists but will reverse before long Exports continued to soar last month while imports took another leg down despite directives to raise coal supply amid power rationing. As a result, the trade surplus reached its highest level since …
8th 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
City narrowly avoids another recession Hong Kong’s economy largely treaded water last quarter, with weaker exports and investment meaning the rebound from Q2’s downturn was much more tepid than expected. The pace of recovery is likely to remain muted in …
1st November 2021
Supply disruptions still weighing on industry The manufacturing PMIs diverged again this month. But the big picture is that power rationing and supply shortages continued to constrain output and push up prices. The Caixin manufacturing PMI continued to …
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
Despite a flurry of media reports in September hinting at widespread disruption, the data suggest that China’s recent power shortages have not been too severe. Electricity output actually rose 0.6% in seasonally-adjusted m/m terms last month, the fastest …
Overview - The economy slowed sharply in Q3. Weakness in services is already reversing as virus controls have been relaxed again. But industry and construction are on the cusp of a deeper downturn that could pull down China’s growth to just 3% next year. …
26th October 2021
Our China Activity Proxy (CAP) shows that output rebounded last month as the disruption to the service sector from virus outbreaks eased. But this wasn’t enough to prevent a sharp contraction last quarter. And even if services activity holds up better …
25th 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
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
China’s rebound falters In q/q terms, official GDP growth slowed to a crawl last quarter. And our China Activity Proxy points to a sharp contraction. Although some of the recent weakness in services is now reversing, industry and construction appear on …
18th 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
Factory-gate inflation hits a new record Producer price inflation reached a new high last month due to the surge in global coal prices. There are few signs that this is feeding through to higher output prices of consumer goods, however. The overall …
14th October 2021
Credit growth at its slowest in 15 years Broad credit growth continued to slide in September and is now at its slowest pace since December 2005. We think credit growth will level off in the coming quarters, as PBOC policy turns more supportive in response …
13th October 2021
Strong exports ease power rationing concerns September exports beat even our above-consensus expectations. Coupled with separate data showing that electricity consumption held up well last month, this suggests that the hit from power rationing has largely …
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
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
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
We still don’t have enough data to judge the extent of the disruption to China’s factory output from power rationing with much certainty. But with supply chains already stretched, even a modest hit to output, which producers downstream might normally …
30th September 2021
Industry softer ahead of power shortages The manufacturing PMIs diverged this month. But the big picture is that industry was coming off the boil even prior to the latest power shortages. On a more upbeat note, the official surveys point to a sharp …
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
Our China Activity Proxy (CAP) suggests that economic output dropped back sharply in August. The big hit to services activity from efforts to contain the Delta variant should mostly reverse this month. But the downturn in the property sector has further …
27th 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
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 …
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 …
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
China and countries that align more closely with it than with the US together account for around half of the world’s population. But the China bloc is far smaller economically than the US bloc and far more dependent on the rival bloc as a source both of …
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
Delta wave hit bigger than expected The hit to service activity from last month’s virus outbreak was even larger than we, and other forecasters, had anticipated. The rest of the economy held up better, although the headwinds facing the property sector …