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The sell-off in bond markets has taken a breather today, helped in part by softer data on the US labour market. However, the scale of the moves over the past week has invoked comparisons to previous financial crises that have been caused by sharp moves in …
4th October 2023
Falls in the value of China’s recorded holdings of US Treasuries tell us little about whether China is divesting from the dollar. A broader look at the data suggests that it isn’t, despite geopolitical pressure to decouple. And while we don’t have timely …
Policy support should drive a turnaround The PMI surveys suggest another month of stable economic activity in September. A continued acceleration in construction activity appears to have offset a further softening in services activity. Meanwhile, …
2nd October 2023
Industrial policy isn't an offset for property downturn Can emerging new industries replace property as a driver of China’s economy? There has been a flurry of discussion in the past couple of weeks in China about whether “new-type industrialisation” …
29th September 2023
China’s economy is regaining some momentum after stalling during the summer. A step up in policy support looks set to deliver a modest cyclical recovery but trend growth remains under pressure. … China Chart Pack (Sep. …
28th September 2023
Overview – China’s economy is regaining some momentum after stalling for a brief period during the summer. A step up in policy support looks set to deliver a modest cyclical recovery but trend growth remains under pressure. Consumer Spending – …
27th September 2023
This is an excerpt from our CE Spotlight series on AI. The whole series can be viewed here . A year ago, China was widely held to be a – perhaps the – global leader in AI. It has an online population larger than the US and Europe combined. Ubiquitous …
26th September 2023
Efforts to boost foreign investment are failing In March, the government launched a year-long “Invest in China” campaign to shore up sagging foreign investment. As part of these efforts, it set out 24 measures in August to improve the business environment …
22nd September 2023
Our China Activity Proxy (CAP) suggests that, after a period of stagnation, China’s economy has returned to growth recently, with output finally surpassing its previous high in August. Policy support is being stepped up, which should underpin a further …
20th September 2023
While policymakers’ efforts to prop up the renminbi and the yen alone are not enough to generate a lasting turnaround , they will probably do enough to buy time until US interest rate expectations and Treasury yields fall back and the dollar depreciates …
15th September 2023
Property controls have been substantively relaxed in recent weeks. The big announcements came on the last day of August. But there has since been plenty of easing at the local level too. At least ten large cities have lifted all home purchase …
This page has been updated with additional analysis and charts since first publication. Economy regains momentum as consumers step up Although a slight uptick in activity was expected, the August data turned out to be even better than anticipated. Fiscal …
A gesture of support from the PBOC The People’s Bank has just announced a cut to bank reserve requirements. With private sector credit demand still weak, this is a gesture rather than a meaningful support measure. Substantial rate cuts or a sea change in …
14th September 2023
The quantitative tools that the PBOC relied on to pump up credit growth during previous downturns have become ineffective due to weak demand. That leaves interest rates as the main avenue for monetary support. But bank lending rates need to decline to a …
11th September 2023
This page has been updated with additional analysis since first publication . Turning a corner thanks to policy support China’s bank loan growth stabilised in August after declining for three consecutive months, and broad credit growth edged up from …
Disinflationary pressures easing CPI exited deflation in August, and PPI rose for the first time in nine months. Core inflation remained unchanged after hitting a 11-month high in July, while services inflation rose to its highest in 18 months. We expect …
Huawei's chip breakthrough The launch of Huawei’s new phone, the Mate 60 Pro, has sparked a debate over the effectiveness of US export controls that were tightened last year, restricting the sale to China of machinery needed to produce sub-18nm chips. The …
8th September 2023
This page has been updated with additional analysis since first publication . Export volumes are likely to soften before long China’s export values continued to contract in August, but this mostly reflects lower prices. Export volumes continued to hold …
7th September 2023
Stimulus efforts are finally gaining momentum. Yesterday, regulators announced measures to support households and shore up the property sector, including looser downpayment requirements and reductions to existing mortgage rates. And today, the state banks …
1st September 2023
China's reopening recovery has fizzled out and the economy is now at risk of a downward spiral. We think policymakers will provide enough stimulus to avoid this and deliver a modest reacceleration in growth over the coming quarters. But most of the …
31st August 2023
This page was first published on Thursday 31 st July, covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Friday 1 st September , and Caixin Services and Composite PMIs on Tuesday 5 th September. Note: We discussed the China …
Our China Activity Proxy (CAP) suggests that China’s economy regained some ground in July, following a contraction in June. But the big picture is that output has levelled off recently and that the economy could tip into a downward spiral unless policy …
29th August 2023
Note: We’ll be discussing the China growth/stimulus question, the BOJ’s policy outlook, Indian food price inflation and more in our monthly Asia Drop-In on Thursday, 31 st August . Register here to join the online briefing. Have the leadership given up on …
25th August 2023
But they aren’t as big a systemic threat as some fear In addition to troubles at Country Garden , the big story in China’s credit markets this week was the turmoil at Zhongzhi. Yesterday, the asset manager cum shadow bank acknowledged that it was in a …
18th August 2023
With the headwinds growing for China’s economy, we think its equity markets will struggle, its 10-year yield will continue to fall and its currency won’t rebound as quickly as we’d thought. At the start of the year China’s economy was powering ahead. But …
17th August 2023
China’s economy has stalled recently and headwinds are still intensifying on multiple fronts. The lack of a stronger stimulus response partly reflects a greater tolerance for economic weakness. But it also points to a worrying degree of policy paralysis, …
Note: We’ll be discussing the economic and financial risks facing China’s economy, and their implications for global markets, in an online briefing on Thursday, 17th August. Register here to join. Financial problems at Country Garden, once considered …
16th August 2023
Property developers on the brink. A slip into deflation. Activity at a standstill. Markets are growing nervous as bad news piles up around the Chinese outlook, but how grim is the economic situation? Is another recession on the cards? Are defaulting …
15th August 2023
This page has been updated with additional analysis and charts since first publication. Growth has slowed to a crawl All the main activity indicators undershot consensus expectations in July, with most either stagnant or barely expanding in m/m terms. And …
This page was first published on Tuesday 15 th August, covering the reduction to the Medium-term Lending Facility rate. We added commentary following the cut to the 1-year Loan Prime Rate on Monday 21 st August. LPR follow-up disappoints after largest MLF …
Exports may be weaker than they appear China’s exports fell 14.5% y/y in July, undershooting the analyst consensus. But given the sharp fall in export prices recently, what’s more surprising to us is that export values haven’t fallen even more. On paper, …
11th August 2023
This page has been updated with additional analysis since first publication. Downturn deepens as borrowers hold back China’s bank loan growth fell to its lowest in seven months in July, while broad credit growth dropped to a record low. We expect further …
Consumer price inflation slipped into negative territory in July. But this probably won’t last more than a quarter or two and has less to do with the health of domestic demand than many think. Inflation in services, the part of the CPI basket most …
This page has been updated with additional analysis since first publication . Services inflation hits 17-month high CPI joined PPI in deflationary territory last month. But this was due to a sharp drop in food inflation caused by base effects. More …
9th August 2023
This page has been updated with additional analysis since first publication . Exports have further to fall Chinese exports contracted in July by the most since the start of the pandemic. But the recent declines mostly reflect lower prices rather than …
8th August 2023
Speeding up bond issuance is a start but not enough Following last week’s dovish Politburo meeting readout, regulators have reportedly told local officials that they have until the end of next month to fully utilize their annual issuance quotas for …
4th August 2023
The property downturn has left state-owned developers the dominant players in a previously privately-led sector. The state is likely to continue playing a larger role as consolidation continues around more financially-secure firms. Based on a sample of …
3rd August 2023
We estimate that China’s trend rate of growth has slowed from 5.0% in 2019 to 3.0% now, based on our China Activity Proxy. This is a steeper deceleration than in the years leading up to the emergence of COVID-19. The official GDP data, while not fully …
2nd August 2023
China's reopening recovery has fizzled out and the economy is now at risk of slipping into a recession. We think policymakers will provide enough stimulus to avoid this and deliver a modest reacceleration in growth over the coming quarters. But most of …
31st July 2023
This page has been updated with additional analysis and charts since first publication. Economic recovery takes a step backwards Hong Kong’s GDP contracted in q/q terms in Q2, underperforming most expectations. A sharp fall in government spending and …
This page was first published on Monday 31st July, covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Tuesday 1st August, and the Caixin services and composite PMI on Thursday 3rd August. Construction downturn deepens The …
China’s leadership promises more support The highlight of the week was Monday’s Politburo meeting. Although light on specifics, the readout was dovish in tone and made clear that more policy easing is on its way. While substantial direct support for …
28th July 2023
Our China Activity Proxy (CAP) suggests that China’s economy contracted in June as the service sector spluttered. Policy support means the economy should return to growth before long. But the pace of future expansion will be more modest than in the past. …
27th July 2023
China is not suffering a balance sheet recession: most private firms are not highly indebted and would borrow if they had more confidence in the economic outlook. But there are other parallels with Japan’s circumstances in the 1990s that point to …
24th July 2023
More support signalled but follow-through remains in question The readout of the Politburo’s quarterly meeting on economic affairs has just been published by state media. It struck a dovish tone but fell short of delivering any major new announcements. …
Regulatory environment is only part of the problem After making life more difficult for many private firms in recent years, officials are shifting course. On Wednesday, a document aimed at promoting the development of the private sector was jointly issued …
21st July 2023
This page has been updated with additional analysis and charts since first publication. Recovery shifts down a gear GDP slowed more than expected in Q2 due to a fizzling out of the reopening boost. Continued weakness in the property sector, possible …
17th July 2023
Recent measures have been sector-specific Policymakers have been taking further steps to support the economy this week. But efforts are being directed at struggling sectors rather than the wider economy through broad stimulus measures. The PBOC and …
14th July 2023
This page has been updated with additional analysis since first publication . Exports to shrink further before bottoming out Chinese exports contracted year-on-year in June by the most since March 2020, with export volumes falling to a 6-month low. And …
13th July 2023
This page has been updated with additional analysis since first publication . Stronger than expected but still relatively weak Although stronger than most had expected, bank loan growth still fell to its lowest in five months in June, while broad credit …
11th July 2023
