China: March PMIs Show Improvement in Economic Activities
Markit/Caixin’s PMI report shows recovery in China’s economy in March. The composite output index rose to 52.9 in March, from 50.7 in the prior month. This marks the highest level since June 2018. While the manufacturing sector returned to the expansionary territory, services activities also showed stronger growth.
It is...
Slowdown in China Remains Pronounced Even After Adjusting for Seasonal Factors
China released its latest macroeconomic data for the first two months of the year. Due to Lunar New Year holiday, the January figures for retail sales, industrial production and fixed asset investment were not released. Despite signs of improvement, the set of data, together with inflation and trade reports...
China’s February PMI Sent Mixed Message. Update on PBOC’s New Tool to Stimulate Economy
The official manufacturing PMI data, published by the National Bureau of Statistics, slipped -0.3 point to 49.2 in February. The market had anticipated no change from the prior month. This shows that large corporations in the sector, staying in contraction for three months in a row, has been in...
China’s Monetary Easing to Continue after End of Trade War
Market sentiment improves further as Trump sent more hints on trade truce extension and “substantial progress” on striking a trade deal with China. Indeed, his indication that a deal on “currency manipulation” has send renminbi (Chinese yuan) to the 7-month high against the US dollar. Meanwhile, China January money/...
China’s Inflation Weakened Sharply. Trade Improvement Masked by Seasonal Factor
Headline CPI eased to +1.7% y/y in January, missing consensus of and December’s +1.9%. The slowdown was mainly driven by food price which fell -0.6 percentage point to +1.9%. Non-food inflation steadied at +1.7%. PPI decelerated sharply to +0.1% y/y, from +0.9% a month ago. The market had already...
Chinese Economy Shows Signs of Stabilization in Late 2018. More Challenge Ahead
The latest set of macroeconomic data for China shows signs of stabilization. This could be attributed to the government's expansionary policies both monetarily and fiscally. While the government is expected to add more stimuli this year, the challenge remains tough.
GDP growth eased to +6.4% y/y in 4Q18, from +6.5%...
PBOC’s Aggressive Liquidity Injection Reveals Severe Growth Slowdown
PBOC has aggressively increased market liquidity. In the form of reverse repo operations, the central bank announced Wednesday that a total of RMB 570B would be pumped to the market. With RMB 10B of previous reverse repo maturing, the net injection would be RMB 560B. While the central bank...
China’s PMIs Confirmed Manufacturing Sector in Contraction
The latest PMI data added further evidence that China’s economy is in bad shape. Trade war with the US has not only weakened trade, but also domestic demand. The job market has also deteriorated, suggesting further stimulus is needed to be in place as soon as possible. We expect...
China’s Monetary Policy Outlook in 2019 – Easing While Refusing to Admit So
Ongoing trade war with the US is accelerating the slowdown in growth in China. As such, the monetary policy adopted by PBOC would continue to be accommodative. Echoing the rhetoric of the annual Central Economic Work Conference, PBOC affirmed that its policy for the coming year would remain “prudent...
China’s October Data Encourage More Easing From Government
The latest set of macroeconomic data in China was mixed. Retail sales grew +8.6% y/y in October, weaker than consensus of, and September's +9.2%. Automobile sales, contributing 10% to retail sales, declined -11.7% in October, marking the first annual contraction in almost 3 decades. Alongside the personal tax reform,...
Upbeat Chinese Trade Data Masked Impact of Trade War
China’s trade surplus widened to US$ 34B in October. Exports grew +15.6% y/y, beating consensus of +11.7% and September’s +14.5%. Import expanded +21.4% during the month, exceeding market expectations of +14.5% and +14.3% in September. Interestingly, the headline trade data does not seem to be dragged by US’ trade...
China’s Economic Growth Slowed More than Expected. Worst of Trade War Yet to Come
China’s economic growth decelerated further in 3Q18, as the impacts of restraining infrastructure investment and trade war surfaced. GDP growth moderated to +6.5% y/y in the third quarter, the slowest since the first quarter of 2009. Growth came in lower than market expectations and second quarter’s +6.7%. On an...
China Eases Monetary Policy Further, Intervening to Avoid Sharp Fall in Renminbi
China announced to cut RRR by 100 bps, effective October 15 and applicable to all types of banks, including large commercial banks, joint-stock banks, city commercial banks, non-county rural commercial banks, and foreign banks whose current RRR stand at 15.5% (large banks) or 13.5% (small to medium banks). The...
Strong Chinese Inflation Mainly Driven by Food Price
China’s headline CPI rose to a 6-month high of +2.3% y/y in August, up from +2.1% a month ago. However, the increase almost entirely came from food prices which jumped to +1.7%, from +0.5% in the prior month. Taking a close look at food inflation, deflation in pork price...
PBOC Prevents Renminbi from Testing 7 Per US Dollar
China is on pins and needles as it sees renminbi (Chinese yuan) fall. The government dares not risk massive capital flight for uncertain benefit in exports by depreciating its currency. The apparent increases in FX reserve over the past months could hardly conceal concerns over renminbi weakness, which has...
Chinese Growth Continued to Shrink in July, Despite Stimulus Measures
July’s data showed that China’s economic growth continued to decelerate although the government has loosened its policy. All key economic activity indicators missed expectations for the month.
Industrial production grew +6% y/y, after a sharp slowdown in June and missing consensus of +6.3%. The moderation has been revealed in the...
PBOC Imposes FX Reserve Requirement as Renminbi Selloff Gets Alarming
PBOC announced last Friday to impose 20% reserve requirement ratio (RRR) on onshore (CNY) FX forward transactions. Despite the central bank’s denial, the move is obviously to moderate recent sharp depreciation of renminbi. Such measure was implemented on October 15, 2015, before removal on September 11, 2017, in an...
Renminbi/Chinese Yuan Depreciates as a Result of Economic Weakness and Loosening Policies
Renminbi’s depreciation since April this year has accelerated over the past two months. While USDCNY has in aggregate rallied over +6% in June and July, renminbi’s weakness was less pronounced against a basket of currencies. The CEFTS index, the official reminbi index, fell -4.4% over the past two months....
Review of China’s June Macro Data (Inflation, FX Reserve, Trade Balance and Credit
Inflation
Headline CPI in China climbed +0.1 percentage point to +1.9% y/y in June, in line with expectations. On monthly basis, inflation contracted -0.1%, compared with consensus of a +0.1% increase. Yet, this is the smallest contraction since March this year. In June, food price registered modest recovery (+0.3% y/y...
Has China Given Green light to Renminbi Selloff?
Weakness in renminbi has accelerated recently, driven by Donald Trump’s new list of tariff against China announced in mid-June, PBOC’s RRR cut and the jump in risk aversion over the Chinese market. USDCNY’s rally of more than +4% over the past two weeks has raised speculations about China’s retaliation...