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The government’s annual work report published on Friday made clear that policymakers will engineer an acceleration in credit growth this year. The report didn’t offer an explicit target for aggregate financing (AFRE), the official measure of broad credit, …
27th May 2020
The fiscal plans unveiled by China’s leadership today are as expansive as those in 2009 but credit growth will remain far more constrained. The focus again is overwhelmingly on measures to boost investment, primarily infrastructure. We expect stimulus to …
22nd May 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 …
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 …
Huawei dispute highlights costs of decoupling The US took further action against China during the past week, including cutting off Huawei from any semiconductor suppliers that use US technology, even if the firms aren’t American. In response, China has …
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
Recovery continues but remains highly uneven Industrial output and investment rose year-on-year in April for the first time since the COVID-19 outbreak. But retail sales and services activity continued to contract, held back by high unemployment. Growth …
15th May 2020
Growth target and policy signals After a delay of over two months, the annual meeting of the China’s legislature, the National People’s Congress (NPC), will kick off next Friday. A schedule has yet to be made public but the key events, the annual work …
Factory-gate prices post steepest drop in over a decade Consumer and producer price inflation fell sharply last month, reflecting the continued weakness in demand. Price pressures are likely to ease further in the coming months, strengthening the case for …
12th May 2020
Credit growth hits a 22-month high Credit growth accelerated further last month, a trend that will probably continue given signals from the PBOC’s Q1 monetary report published over the weekend that more stimulus measures are in the pipeline. This will …
11th May 2020
Tourism still in the doldrums China recorded 115 million domestic tourism trips during the Labour Day holiday that ended on Tuesday. This was more than double the 43 million trips during the Qing Ming holiday in early April, a jump that many interpreted …
8th May 2020
Exports can’t defy the global downturn for long China’s exports were much stronger than anticipated in April but are likely to drop back sharply this month. In contrast, the recent resilience of imports faltered in April as inbound shipments began to play …
7th May 2020
Epidemiological success, economic pain Hong Kong’s economy contracted by the most on record last quarter as tourism collapsed, trade flows slowed sharply and social distancing weighed on domestic spending. The city’s GDP fell 5.3% q/q in …
4th May 2020
Recovery remains slow and uneven The official composite PMI was broadly unchanged in April, consistent with a further recovery but at a slow pace relative to the abrupt downturn in February. The breakdown suggests that weak exports led to a slowdown in …
30th April 2020
Recovery remains tepid as weak exports hold back manufacturing The latest survey data shows that renewed weakness in the manufacturing sector was offset by a pick-up in construction and services, leaving the overall pace of recovery broadly unchanged in …
Output from China’s industrial sector rebounded in March, as the government encouraged firms to re-open. But revenues remained much weaker, signalling that demand remained depressed. Inventories surged as a result. (See Chart 1.) Subdued demand is likely …
27th April 2020
In its meeting last week, the Politburo introduced a new slogan: the “Six Ensures” (六保). The first is an instruction to officials to “ensure employment”. On paper, they are doing pretty well. At the end of March only two million people were claiming …
24th April 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 …
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 …
GDP likely to remain below 2019 levels in Q2 The main event this week was the release of the Q1 GDP figures, which showed a 6.8% y/y fall in output, the first contraction since quarterly GDP figures were first published in 1992. We covered the data in …
17th April 2020
China faces slow recovery from first contraction on record GDP contracted in Q1 for the first time since China began publishing quarterly data in 1992, though we suspect that the slump in output was even deeper than officials claim. The monthly data …
Overview – After the deepest downturn since the Cultural Revolution in Q1, China’s economy will return to growth this quarter. But with labour market strains holding back domestic demand and external headwinds intensifying, output is still set to contract …
15th April 2020
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 …
Worse still to come for exports Shipments picked up last month as factories re-opened and domestic demand began to recover. But with economic activity in the rest of the world now collapsing, the worst is still to come for China’s export sector. The …
14th April 2020
Q1 GDP to contract barring massive falsification The government will publish Q1 GDP figures next week in what will be an unprecedented test of its willingness to acknowledge economic weakness. There have been doubts about the GDP data for years. Most …
9th April 2020
An uneven recovery The first monthly data points for March are so far broadly consistent with what the daily indicators we track have been showing – that activity began to recover last month but remains weak. The PMIs were derided by some as implausibly …
3rd 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
Activity improves but recovery to be slow The Caixin manufacturing PMI strengthened last month from February’s abysmal levels and suggests that the contraction in activity has already bottomed out. But weak foreign demand and labour market strains will …
1st April 2020
Past the worst but weakness to drag on The latest survey data add to broader evidence that activity has started to rebound but suggest that weak foreign demand and labour market strains remain headwinds. The official manufacturing PMI increased from 35.7 …
31st March 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
Pulling down the shutters China has continued its slow return to normality this week. Remaining restrictions on movement within the country are being relaxed. Residents of Hubei outside Wuhan are now free to travel; Wuhan’s lockdown will end in early …
27th March 2020
Activity across both industry and services is recovering as measures to contain the coronavirus have been eased. But the recovery is likely to run into the constraint of weak demand before long. The labour market is the biggest domestic concern. The …
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
GDP target unachievable, more stimulus needed Officials in China are in the midst of reviewing the 2020 targets that were set (but not made public) during the Central Economic Work Conference in December. The new targets will be announced at the National …
20th 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 …
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
Weakest-on-record data point to a sharp contraction in Q1 The latest activity and spending data were much weaker than expected and point to a far deeper downturn than during the Global Financial Crisis. While domestic conditions should improve slowly in …
16th 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
PBOC may revive old policy tool Policymakers have signalled that further monetary loosening is imminent. The State Council is calling for cuts to banks’ required reserve ratio (RRR) and PBOC officials are dropping hints about a possible cut to benchmark …
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
Policy support keeps the credit taps on Credit growth was stable last month despite the slump in economic activity. In most countries, credit growth would slow sharply in response to a shock such as the coronavirus, as households defer large purchase and …
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
A disinflationary shock The coronavirus outbreak is putting downward pressure on inflation. While supply chain disruptions have kept food prices high, weaker demand has weighed on the price of other goods and services. Consumer price inflation fell from …
Imports yet to reflect the slump in demand Exports dropped the most since 2008 at the start of this year. Imports held up better but at the expense of a jump in inventories. Inbound shipments will soon play catch-up with the slump in domestic demand. …
9th March 2020
Activity continues slow march back to normality Disruption from efforts to contain the coronavirus outbreak has continued to ease during the past week, with most of the daily indicators that we track on our coronavirus webpage pointing towards recovery. …
6th 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
An unprecedented slump in activity The latest PMI readings were in line with our downbeat expectations but will come as a shock to most analysts, who had anticipated a much smaller hit to business activity from the coronavirus outbreak. Particularly …
Chinese factories were slow to reopen even after the extended Lunar New Year holiday came to end. One week after most of the country officially went back to work on 10 th February, more than half of large industrial firms remained closed. That has now …
28th February 2020