PBOC to Ease Monetary Policy Further Despite Strong Inflation
We expect China’s monetary policy will be more expansionary in coming months as the economy slows further. Struggling between boosting growth and curbing CPI acceleration, the authority has probably chosen the former. Meanwhile, PBOC is obliged to do more as fiscal stimulus remains modest.
PBOC has lowered interest rates three...
China Data Reveal Further Downside Risks in Economy
China’s major economic data in October all missed expectations and slowed from a month ago. Growth in industrial production decelerated to +4.7% y/y, from +5.8% in September. Retail sales growth weakened to 7.2% m/m, compared with +7.8% in September. Part of the reasons can be deferred spending ahead of...
China’s CPI Soared to Highest Level in Almost 8 Years; Exports Improved on Tariff Exemption
Headline CPI in China accelerated further to +3.8% y/y in October. This had exceeded consensus of +3.4% and breached the 3% target for the first time since 2013. Food price, in particular pork price, was again the key driver for the strong inflation. Food inflation soared +15.5% y/y, compared...
PBOC Cut 1-Year Lending Rate for the First Time since 2016
For the first time in over 3 years, People’s Bank of China (PBOC) lowers the rate of the 1-year medium lending facility (MLF) by -5 bps to 3.25%. This surprising move underlines the rapid deterioration of domestic growth and paves the way for a cut in the loan prime...
China Watch – PBOC Paused Rate Reduction in October. RRR Cut Still Likely as Growth Continues to Slow
The market was surprised to see that PBOC left the loan prime rate (LPR), its latest benchmark rate, unchanged in October following two consecutive cuts in the prior two months. Yet, this came in line with our expectations that elevation inflation could retrain PBOC from extending monetary easing.
Recall that...
Strong Inflation Could Affect PBOC’s Policy to Stimulate Growth; Trade Data Suggests China Continues to Suffer from Trade War
Headline CPI in China rose to +3% y/y in September, reaching PBOC’s target for first time since December 2013. However, this was driven by elevated pork price rather than improvement in household spending. Food price jumped +11.2%, accelerating from +10% in August. This was predominantly driven by pork price...
China Watch – Economy Going from Bad to Worse
China’s macroeconomic indicators showed significant weakness across the board. Industrial production gained +4.4% y/y in August, easing from +4.8% in the prior month. The growth rate came in weaker than consensus of +5.2% and marks the slowest in over 17 years. The rapid slowdown was partly driven by the...
China Watch – Tariff Exemption Further Evidenced Weakness in Underlying Economy
China announced that 16 types of US exports will be exempted from tariff. While this may be a gesture ahead of the October trade negotiation, we view this as a sign of further weakness in china’s economic outlook. Trade data surprised to the downside in August with both exports...
China Cuts Banks’ Lending Rates as Trade War Escalates
PBOC has recently made some changes in its interest rate policy. Following the move to link the loan prime rate (LPR) to open market operations, the medium lending facility (MLF) rate, the central bank over the weekend announced the plan to set a floor for mortgage rate. The first...
Chinese Data Surprised to Downside in July. Tariff Delay Won’t Help Arrest Slowdown
China’s economic data surprised to the downside in July. Delay in US tariff should have limited boost on China’s growth outlook. Industrial production gained +4.8% y/y in July, missing consensus of +5.8% and June’s 6.3%. The slowdown is the most severe since February 2009 and caught the market in...
China PPI Returns to Deflation, PBOC Probably Cuts Rate in September
Headline CPI in China accelerated to +2.8% y/y in July, from +2.7% a month ago. Same as previous months, the key driver of inflation was food prices, which jumped +9.1% y/y in July. In June, food prices also rose +8.3% y/y. Of which, pork prices soared +27% y/y and...
Chinese Economy Weakest in Almost Three Decades. Growth Could Fall Below 6% by Year-End.
GDP growth eased to +6.2% y/y in 2Q19, down from +6.4% in the prior quarter. This marks the weakest growth in 27 years. On a q/q saar basis, GDP growth moderated sharply to +5.6% from first quarter's +6.9%. For the first half of the year, the economy expanded +6.3%.
Growth...
China’s Strong Trade Surplus Driven by Contraction in Imports. Strong Inflation Unlikely Restrains Further Easing
China headline CPI stayed unchanged at 2.7% y/y in June. Most of the increase was driven by food price. While African swine fever has caused pork price to soar, extreme weather affected harvest, sending fruit price higher. Food price jumped +7.7% in May from a year ago. Excluding food...
China’s Economic Data Prove Economy Slowing Down. PBOC Could Follow FOMC in Cutting Interest Rate
Despite the mixed headline readings, China's macroeconomic data in May were in line with our view that the country's economy continues to slow.
Growth in industrial production fell to 5% y/y, missing consensus of , and April's, 5.4%. IP growth in May marks the lowest growth since 2002. Moreover, this...
Closer Look at China’s Trade Data Reveals that Trade War is Eating Into Economy
The US-China trade war continues to evolve. The upcoming important event would be the G-20 summit on June 28 and 29. US' Donald Trump has recently noted that he expects to meet China's Xi Jinping, or would impose 25% tariff on the rest of US$300B Chinese exports. The latest...
Threat of Dumping US Treasury Signals China is Running Out of Weapons in Trade War
China’s White Paper, entitled “China's Position on the China-U.S. Economic and Trade Consultations” on recent escalations of trade war has weighed on the fragile market. While the majority of market participants judges that China has opted for a hardliner approach, interpretations of the outcomes are diverse. While some judge...
China’s Slowdown Resumes as Seasonal Effects Faded
Economic data in April prove that China’s economy is not yet out of the wood. Growth in industrial production , retail sales and fixed asset investment all surprised to downside, suggesting that the rebound in March was only due to one-off, temporary factors. Re-escalation of US-China trade war is...
Decline in Chinese Exports Signals Global Demand Slowdown. Renewed Trade War Forces PBOC to Ease Further
Disappointing trade data in China was mainly driven by the large contraction in exports. Instead of merely bilateral trade conflict between the US and China, the broadly based slowdown in exports to China's major trading partners indicates that global demand is weakening again. Donald Trump's threat of raising tariff...
China First Quarter GDP Growth Beat Expectations. Key Macro Data Rebounded in March, albeit from Low Base
China’s GDP expanded +6.4% y/y in 1Q19, same pace as 4Q18 but beating consensus of +6.3%. Major macroeconomic data showed strong rebound in March and exceeded expectations. Over the past weeks, data flow in China has already signaled improvement in China’s economy: Both headline CPI and PPI markedly recovered...
China: Renminbi Internationalization Remains Sluggish
Renminbi internationalization
The IMF’s latest report reveals that the process of renminbi internationalization remains sluggish as renminbi (Chinese Yuan) is still a tiny portion of global central banks's FX reserve. In 4Q18, 1.89% global FX reserve was allocated to renminbi , compared with 1.07% in 4Q16, when the currency was...