Sun, Jul 25, 2021 @ 11:44 GMT

China Watch

PBOC Likely to Ease Further, Adding to Renminbi’s Downside Bias

Renminbi has been range-bounded against the US dollar since June. Traders in the Chinese currency has turned cautious after People’s Bank of China (PBOC) surprisingly reduced the reserve requirement ratio earlier this month. The move was contrary to the broad theme of monetary policy normalization in major central banks...

China to Continue Curbing Excess Strength in Renminbi

Losing -1.8% month-to-date, CNY has erased much of the gain made against USD since the beginning of the year. While the broadly based USD rally after the June FOMC meeting is the major driver, PBOC’s intervention has also prevented the renminbi from having meaningful gains. In April and May,...

China’s Recovery Slowed in May amidst Resurgence of Pandemic

China’s major economic data missed expectations in May. Industrial production (IP) expanded +8.8% y/y in May, worse than consensus of +9.2% and April’s +9.8%. Retail sales growth decelerated to +12.4% y/y, from +17.7% in April. The market had anticipated a +14% growth. Fixed asset investment (FAI) gained +15.4% y/y...

China PMI Reports Suggest that Exports Growth Eased while Price Pressure Intensified

The latest PMIs reveal that China’s economic activities eased in May. The Caixin services PMI eased to 55.1 in May from 56.3 a month ago, while the manufacturing PMI increased marginally, by -0.1 point, to 52.The detailed report suggests that new business slowed which price pressures intensified. The situation...

PBOC Seeks to Curb CNY Appreciation by Withdrawing FX Liquidity

People’s Bank of China (PBOC) announced to increase of FX deposit reserve requirement ratio (RRR) to 7% from the current 5%, effective June 15. The move, together with recent comments from official, suggests that the central bank is getting uncomfortable with recent appreciation in renminbi (RMB, CNY). We believe...

China’s Growth Slowed Across the Board in April

China’s April data sent a mixed message about the economy. Retail sales expanded +17.7% y/y in April, significantly weaker than consensus of +25% and March’s +34.2%.  Urban fixed asset investment (FAI) growth moderated to +19.9% in the first 4 months of the year, from +25.6% in 1Q21. The market...

China’s Growth Momentum Accelerates Further in Second Quarter, as Shown in Latest PMI and Trade Data

The latest data suggests that China’s economy continues to improve in the second quarter. The Markit/Caixin services PMI increased to 56.3 in April, highest since December 2020. The reading also beat consensus of 54.2 and March’s 54.3. Separately, China's trade surplus tripled in April, compared with a month ago. Markit/Caixin...

China’s Economic Activities Expanded Strongly in March. Trade Frictions and Pandemic Remain Key to Outlook

China’s official data suggest that the country’s economy recovered significantly in March. PMI readings for all of manufacturing, services and construction activities improved strongly. While seasonal factor (low base effect in February) played a role, the strong first quarter reading signals that economic recovery remains underway. Key risks are...

China Economic Activities Expanded Significantly, Mainly Due to Low Base Effect

China's macroeconomic data for the first two months of this year have delivered a mixed message. While growth in industrial production (IP), retail sales and urban fixed asset investment (FAI) all exceeded 30% when compared with the same period of last year, this was driven by the exceptionally low...

China PMIs Affirm Broad-based Slowdown in Activities

China’s PMI readings eased further in February, signalling that economic growth is losing steam. However, vaccination program worldwide is sending hopes that global economic recovery will accelerate later in the year. This would benefit China which is the world's largest exporter. Caixin’s services PMI slipped -0.5 point to 51.5 in...

Awaiting Overdue Rebound in USDCNY

Strengthening against US dollar for 8 consecutive months, Renminbi (Chinese yuan) has accumulated gains of about 10% since June 2020. We believe the rally is overextended as China's economic recovery has shown signs of losing steam while yield differential between US and China has narrowed over the past few...

China’s Inflation Surprised to Upside in December. Outlook Moderates amidst Fall in Pork Price

China’s inflation surprised to the upside in December. Thanks to food price, headline CPI improved to +0.2% y/y in December, compared to deflation of -0.5% a month ago. Food inflation rebounded to +1.2% y/y, after contracting -2% a month ago, as pork price deflation narrowed to -1.3% from November’s...

China’s November Data Signals Recovery Continues. PBOC to Keep Powder Dry

The latest set of economic data indicates economic recovery in China continued. Growth in industrial production improved slightly, while manufacturing investment accelerated, thanks to strong exports growth. Retail sales growth accelerated, suggesting internal circulation has taken effect. Industrial production expanded +7% y/y in November, inline with expectations and up +0.1...

China Fell into Deflation First Time in More than a Decade

The country recorded deflation for the first time since October 2009. Headline CPI contracted -0.5% y/y in November, compared with consensus of a flat reading and a +0.5% gain in October. Food inflation dropped -2% y/y in November following a +2.2% gain in October. Of which egg and pork...

China’s Economic Recovery and Less Policy Accommodation Lend Support to Renminbi

The latest set of economic data in China reflects that recovery continued in October. Growth was seen in both the supply and demand sides. However, while supply side continued to expand more than anticipated, the consumer spending did not perform as strong as market expectations. PBOC has recently mentioned...

China Data – Inflation Slowed Markedly on Food Price; Trade Surplus Widened as Exports Growth Strongly

China’s inflation moderated in October. Headline CPI eased sharply to +0.5% y/y, from +1.7% a month ago. The decline was mainly driven by food price, of which growth decelerated to +2.2% from September’s +7.9%. Non-food price actually stayed flat at 0%, while core CPI also steadied at +0.5%. Concerning...

China’s GDP Growth Missed Consensus. Strong Activity Data Support Renminbi’s Outlook

The latest set of China's macroeconomic data is mixed in the headline. GDP growth in the third quarter came in below market expectation. However, major indicators such as industrial production, retail sales and fixed asset investment all beat consensus, confirming recovery is underway. Against this backdrop, we expect PBOC...

China’s Inflation Weakened as Growth in Food Price Decelerated. Subdued Core CPI Evidenced Domestic Economy Not Yet Out of the Woods

China’s headline CPI moderated to +1.7% y/y in September, from +2.4% a month ago. This has missed consensus of +1.9%. The weakness was mainly driven by pork inflation which slowed to +25.5% y/y, from +52.6% in August. This contributed about 0.7 percentage point to headline CPI’s moderation. Fresh vegetable...

PBOC Moves to Curb Renminbi’s Strength

PBOC announced over the weekend to lower the FX risk reserve ratio for forward foreign exchange sales from 20% to 0, effective October 12. The move is likely a response to the strength in renminbi (a.k.a. RMB, CNY). The central bank pledged to “maintain the flexibility of the RMB...

PMIs Suggest China’s Recovery Remained Intact in September. Yield Differential to Support CNY

The latest economic indicators show that China’s economy continued to recovery in September. NBS’ official manufacturing PMI climbed +0.5 point higher to 51.5 in September, beating consensus of 51.3. The non-manufacturing PMI also increased to 55.9 from 55.2 in August. The composite index gained +0.6 point to 55.1 last...