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Credit growth at its slowest in 32 months Credit growth dropped in August to its slowest pace since December 2018. With the PBOC now shifting gears to a slightly more supportive stance, credit growth may level off in the coming quarters. But the usual …
10th 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 …
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
Factory-gate inflation hits a 13-year high Producer price inflation reached its highest since August 2008 last month due to the rally in global commodity prices. But the breakdown suggests that upward pressure on the factory-gate prices of consumer goods …
Current strength unlikely to last Exports and imports were much stronger than anticipated last month thanks to buoyant demand, even as the data point to some lingering supply shortages. We continue to think shipments will soften in the coming quarters …
7th 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
Industry falters amid hits to both supply and demand The Caixin manufacturing index dropped to an 18-month low in August, adding to signs from the official PMI released yesterday that industry is coming off the boil. The surveys point to worsening supply …
1st September 2021
A WeChat post by a prominent blogger voicing support for Xi Jinping’s “ common prosperity ” campaign has been widely re-published by state media, giving it a rare seal of Party approval. The post argues that the recent regulatory crackdown is just the …
31st August 2021
Delta wave hit services hard The latest surveys suggest that China’s economy contracted last month as virus disruptions weighed heavily on services activity. Industry also continued to come off the boil as supply chain bottlenecks worsened and demand …
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
Our China Activity Proxy (CAP) suggests that output dropped back further in July. This shouldn’t be dismissed as a temporary setback due to the recent virus outbreak. The main drag last month came from industry and construction, where the key headwinds …
24th 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
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 …
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
Not just about Delta wave disruptions There was a broad-based slowdown in all the key indicators last month. This partly reflects disruptions to consumer activity due to the recent virus flare-up and flooding in central China. But investment spending and …
16th 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 slowdown in credit growth resumes After stabilising in June, broad credit growth resumed its downward trajectory in July and is now at its slowest since February last year. We expect the slowdown and resulting headwind to the economy to continue in …
11th August 2021
Underlying price pressures swamped by pork price slump Rising factory gate prices for electronics products signal that supply chains are still tight but, with both semiconductor imports to China and China’s exports of electronics rising over the past …
9th 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
Economy struggling to gain further ground The latest surveys suggest that the pace of growth slowed more than expected last month. Supply bottlenecks remain a constraint. But the PMIs suggest demand is cooling too, taking the heat out of price gains and …
2nd 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
Recovery took a leg down in Q2 due to export decline Hong Kong’s economy contracted last quarter as exports moderated after an exceptional Q1. The path of output is likely to remain subdued until Hong Kong’s borders reopen. After soaring 5.4% q/q in Q1, …
Questions about the strength of China’s post-lockdown rebound have become louder since the People’s Bank cut the required reserve ratio three weeks ago. But the trigger for this week’s sharp equity market sell-off was instead growing disquiet about the …
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
Overview – China’s economy has been defying gravity thanks to elevated global demand but this support may now be fading. Meanwhile, last year’s policy easing has been fully reversed. An abrupt slowdown is not likely to follow, but highly-indebted firms, …
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 …
Our China Activity Proxy (CAP) suggests that growth accelerated in q/q terms last quarter but that output edged down in June on the back of softer industrial and construction activity. We think China’s COVID-19 rebound has reached its limits and that …
22nd July 2021
This Focus has been updated to incorporate the latest publicly-available information on China’s eCNY project, including the PBOC White Paper published on 16 th July 2021. The original version of the Focus , published on 27 th May 2021, is here . In this …
21st 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
Better than Q1 but growth still subdued China’s GDP growth dropped back in y/y terms last quarter as the base for comparison became less flattering. In q/q terms, output rose at a slightly faster pace than in Q1, when a flare-up in virus cases weighed on …
15th July 2021
Current strength is not sustainable Headline trade growth was stronger than expected last month, partly thanks to an increased supply of semiconductors. But exports remained below their recent peak and we still think shipments will soften in the coming …
13th 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
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. …
Credit growth flattens Credit growth levelled off in June having previously decelerated to the pre-pandemic pace. We suspect this is a pause rather than an end to the slowdown – today’s RRR cut notwithstanding. Either way, the deceleration over the first …
Price pressures start to ease After reaching a 12-year high in May, producer price inflation dropped back in June as the rally in global commodity prices faltered. Consumer price inflation declined too, on the back of a sharp drop in pork prices. We think …
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
More evidence of a slowdown The Caixin manufacturing index published today dropped back last month and adds to signs from the official PMI released yesterday that momentum in industry is waning. The surveys point to a levelling off in demand and easing of …
1st July 2021
Some believe that China is adding to global inflationary pressure. The opposite is closer to the truth: the large increase in China’s trade surplus over the past year signals that supply from China has risen far more than demand. Global consumer goods …
30th June 2021
Growth slowing, price pressures easing The latest surveys suggest that growth softened this month. A slower improvement in services activity was mostly to blame. But supply shortages also continued to hold back output in the manufacturing sector. On a …
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
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
Our China Activity Proxy (CAP) suggests that output remained strong in May but didn’t rise much further, with slowing credit growth weighing on construction and China’s pandemic-induced export boom showing signs of peaking. We think output will, at best, …
23rd 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
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
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
Consumption a bright spot as momentum elsewhere falters Headline growth on all the key indicators dropped back last month. But after adjusting for base effects the picture was more mixed, with investment slowing, industrial output growth holding steady …
16th 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
Credit growth takes another leg down Broad credit growth continued to slide in May and is now at its slowest since February last year. Evidence of policy tightening weighing on borrowing is clearest in bank loan growth which, apart from during last year’s …
10th June 2021
Factory-gate inflation hits twelve-year high Producer price inflation continued to surge and reached its highest level since September 2008 last month, on the back of a further rise in global commodity prices. That said, there are some signs in the data …
9th June 2021
Downhill from here? Headline trade growth remained elevated last month. But trade volumes dropped back in levels terms and, while supply constraints are partly to blame, there are signs that demand may have peaked too. Export growth dropped back from …
7th June 2021