People's Bank of China

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July 23, 2024

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China: The Squeezed Middle and Bottom 50%
Paying Article

July 23, 2024 8:15 AM UTC

Uncertainty over income and employment, adverse wealth effects from lower house prices, plus growing risk aversion, will likely mean that consumption continues to struggle. This is one of the key reasons why we forecast slower H2 GDP growth and look for 4% in 2025.

July 22, 2024

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China: Surprise 7 Day Reverse Repo Rate Cut
Freemium Article

July 22, 2024 8:41 AM UTC

China 10bps cut in the 7 day reverse repo rate and 1 and 5yr Loan Prime Rate (LPR) was sooner than expected, as a move had not been anticipated until the Fed cuts rates.  However, this is not the start of a new aggressive policy phase, but rather a tactical move given the targeted nature of easing.

July 15, 2024

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China: Retail Sales Drags Q2 GDP
Paying Article

July 15, 2024 7:33 AM UTC

We are revising down our 2024 GDP forecast from 4.9% to 4.7%, both due to the weaker than expected Q2 GDP figure but also the weak underlying momentum of consumption.  Some further targeted policy measures are likely in the coming months, but will struggle to lift economic momentum.

July 10, 2024

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China: Weak CPI and M2 Trends
Paying Article

July 10, 2024 7:27 AM UTC

China disinflation process is clear in the June CPI data, with excess production and soft consumer spending producing a lower than expected outcome.  Combined with weak M2 money growth, parts of China economy remain weak and point to a softening of GDP growth in H2.  However, policy action will li

July 02, 2024

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China: 3rd Plenum Incremental Not Game Changing
Paying Article

July 2, 2024 8:10 AM UTC

The 3 plenum July 15-18 will likely see some additional measures that will support or stimulate China economy.  However, they are unlikely to be game changers, such as a Yuan2-4trn program of buying most unsold homes or structural increase in the unemployment/health and pension safety nets to free

June 19, 2024

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China Outlook: 2024 on Track, but 2025 Headwinds
Paying Article

June 19, 2024 9:35 AM UTC

Public investment and industrial production in high tech and renewables are helping to support growth and should get the economy close to 5% in 2024.  However, underneath the surface, consumption is slowing, private sector investment and employment growth is sluggish, and residential property inves

June 17, 2024

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China Data: Mixed Momentum and No MTF Cut Until October
Paying Article

June 17, 2024 6:59 AM UTC

Overall the May data suggests that enough momentum exists for Q2 GDP to be above 5.0% Yr/Yr, which given the Q1 GDP figure means that the odds are good that the 2024 5.0% GDP target can be meet.  However, we see a softer of H2 GDP and 4.0% GDP in 2025, given weak domestic demand is unlikely to chan

June 12, 2024

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China CPI: Core Slows and 10bps June 17 MLF Cut?
Paying Article

June 12, 2024 7:34 AM UTC

 China disinflation is clear in the latest numbers for May, with core falling 0.2% on the month.  Further stimulus will likely arrive in the form of monetary easing.  While it is a close call, we look for a 10bps cut in the medium-term lending facility rate (MLF) from 2.50% on June 17.    

June 03, 2024

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China Finance Weakest Links: Small Banks and Property Finance
Paying Article

June 3, 2024 9:19 AM UTC

China authorities appear to have the financial stability spill over from the property sector until control currently, through a combination of direct support for housing and forced mergers of weak banks (mainly rural so far).  This game plan will likely be followed for the next few years. However,

May 17, 2024

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China: Lopsided Growth and New Housing Measures
Paying Article

May 17, 2024 6:54 AM UTC

Overall, the April industrial production suggests Q2 GDP should be reasonable, but weak retail sales suggests H2 2024 can be disappointing. We stick with a 4.6% forecast for 2024 GDP growth.    

May 15, 2024

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China: Too Much Debt In Some Sectors
Paying Article

May 15, 2024 9:55 AM UTC

While part of corporate debt is quasi government (SOE and LGFV’s) and China creditors can be pursued to rollover by the authorities for larger borrowers, households and part of the private sector are focused on the previous buildup of debt.  With China authorities reluctant to aggressive ease fis

May 13, 2024

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China RRR and Rate Cuts
Paying Article

May 13, 2024 7:54 AM UTC

The latest China money supply and lending figures show that private household and business lending is very subdued.  More need to be done to boost credit demand as well as credit supply.  However, the authorities desires to avoid too much Yuan weakness will likely mean that the next move is a 25bp

May 08, 2024

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China Equities: A Tactical Play
Paying Article

May 8, 2024 2:20 PM UTC

China equities can see a tactical bounce of 5-10% in the coming months.  Cheap valuations and  underweight global fund positions means that the scale of pessimism only has to get less bad on the economy and China authorities attitude towards businesses.  While we see a tactical opportunity, we do

May 03, 2024

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EMFX: Diverging On Domestic Forces Not Less Fed Easing Hopes
Paying Article

May 3, 2024 10:45 AM UTC

While U.S. economic developments, plus Fed policy prospects, will be important in terms of EM currency developments, domestic politics and fundamentals will also be decisive. These can keep the South Africa Rand volatile in the remainder of 2024, given the risk of a coalition government and African

May 02, 2024

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China Politburo: Help for Housing, But No Game changers
Paying Article

May 2, 2024 10:50 AM UTC

Politburo statement in late April suggests extra support for residential property.  However, we see this as being incremental rather than any game changers and we still see residential investment remaining a negative drag on 2024 GDP growth.

April 29, 2024

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China: Depreciation Rather Than Devaluation
Paying Article

April 29, 2024 1:00 PM UTC

We feel that a devaluation of the Yuan is unlikely in 2024, both to avoid potentially politically destabilizing capital outflows but also to avoid upsetting the next U.S. president.  Policy is geared more towards controlled depreciation to help competiveness but reduce other risks.  The Yuan has a

April 16, 2024

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China: Q1 Upside Surprise, but March Disappoints
Paying Article

April 16, 2024 8:33 AM UTC

Q1 GDP upside surprise was driven mainly by public sector investment.  With the government still to implement the Yuan 1trn of special sovereign bonds for infrastructure spending, public investment will likely remain a key driving force.  However, the breakdown of the March data show that retail s

March 20, 2024

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China Outlook: The Struggle to Hit 5% Growth
Paying Article

March 20, 2024 11:00 AM UTC

China’s 5% growth target will likely be tough to meet with residential property investment likely to knock 1.0-1.5% off GDP and net exports a small negative. With sluggish private investment, this means some of the old engines of growth are not firing.  Some additional fiscal stimulus will likely

March 18, 2024

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China: Unbalanced Growth
Paying Article

March 18, 2024 8:28 AM UTC

The February monthly data shows unbalanced growth.  Industrial production and public investment picked up, but retail sales slowed and residential property remains a negative drag on GDP.  While H1 GDP growth will be ok, it will likely slow in H2 and we still stick to a forecast of 4.4% for 2024 a

March 15, 2024

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China: No PBOC MTF Cut and Protesting Low Government Bond Yields
Paying Article

March 15, 2024 8:51 AM UTC

Bottom Line: The PBOC decided not to cut the Medium-Term Facility (MTF) rate, but surprised by also withdrawing liquidity in what looks like a protest at the recent decline in government bond yields.  A 10bps MTF cut should still arrive in Q2, but later rather than sooner.  

March 11, 2024

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China: Lunar New Year Boosts CPI, But Disinflation Still In Place
Paying Article

March 11, 2024 8:29 AM UTC

Bottom Line: February China CPI surged to +0.7% v -0.8% Yr/Yr due to three factors.  The late lunar New Year boosted CPI seasonally, while the good lunar New Year also boosted pork/food prices and travel prices.  The bounce is unlikely to be sustained and we see a fall back to 0.3-0.4% Yr/Yr in Ma

March 05, 2024

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China: 5% 2024 Goal Tough with L Shaped Residential Property
Paying Article

March 5, 2024 9:43 AM UTC

Bottom Line: China’s 5% growth target will likely be tough to meet with residential property investment likely to knock 1.0-1.5% off GDP and net exports a small negative. With sluggish private investment, this means the old engines of growth are not firing.  Some additionally fiscal stimulus will

March 04, 2024

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Taiwan Speaker Reduces China/Taiwan War Risk
Paying Article

March 4, 2024 10:30 AM UTC

Bottom Line: Taiwan new speaker, Han Kuo Yu, has a willingness to open dialogue with China. This does not stop China likely undertaking large scale military exercises in the spring around Taiwan, as it still seeks to pressure the incoming DPP president.  However, we see the new Taiwan speaker elect

February 28, 2024

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China: Authorities Views and Policy Changes
Paying Article

February 28, 2024 10:15 AM UTC

Bottom Line: China authorities leave the impression that further policy stimulus will likely be measured rather than aggressive.  We feel that they are not pessimistic enough on the medium-term hangover from the residential property sector and this is why we are downbeat on 2024 GDP growth and beyo

February 21, 2024

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China: Yuan Outflow Fears Versus Net Exports
Paying Article

February 21, 2024 11:00 AM UTC

Despite a still overvalued Yuan, China authorities are reluctant to accept too much Yuan weakness for fear of causing domestic capital outflows and discontent with China’s government. At some stage, if GDP growth surprises on the downside, China authorities could decide that a controlled Yuan decl

February 20, 2024

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China: 5yr LPR Cut But Not 1yr LPR
Paying Article

February 20, 2024 9:17 AM UTC

A larger than expected 25bps cut in the 5yr Loan Prime Rate (LPR) has been delivered, but the 1yr LPR rate was unchanged given that PBOC reluctance to cut the 1yr Medium-Term Facility rate (MTF) this month.  The 5yr LPR rate is not a game changer for residential property, as bigger policy moves are

February 13, 2024

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China: 5% or 4.5-5.0% Growth Target
Paying Article

February 13, 2024 10:34 AM UTC

Though economics would argue for a 4.5-5.0% growth target for 2024, politics will likely mean that a 5% growth target is chosen in March.  With the residential property overhang, weak net exports with a shift of global supply chains and sluggish private sector business investment growth, this will

January 17, 2024

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China: GDP 5.2% for 2023, but 2024 To Struggle
Paying Article

January 17, 2024 9:24 AM UTC

Quarterly GDP is interesting and came in at 1.0% after the 1.3% quarterly gain in Q3.  The trend in quarterly GDP (Figure 1) is also not consistent with 5% growth and the Yr/Yr will dip in Q1 2024 when the large gain in Q1 2023 drops out (due to the end of zero COVID policies).  We maintain the 4.

January 12, 2024

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China: January MTF and March RRR Cut?
Paying Article

January 12, 2024 9:25 AM UTC

Figure 1: China RRR (%)Source: Datastream/Continuum Economics  
A senior PBOC official has hinted at an RRR cut on Tuesday (here), given the desire to sustain credit growth.  Similar comments were evident last July before the RRR cut in September.  We would argue that further monetary easing is l

January 05, 2024

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China: Five Headwinds To Long Term Growth
Paying Article

January 5, 2024 9:00 AM UTC

The catch-up productivity argument would point towards 4-5% growth in China in the 2025-2030 period.  However, we are concerned that the residential property downturn and rewiring of global supply chains will be persistent headwinds for China GDP growth in the coming years and that the adverse popu

December 27, 2023

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USD Reserve Status: Slow Slippage
Freemium Article

December 27, 2023 1:23 PM UTC

Figure 1: Pct of USD in Allocated FX Reserves 
Source: IMF COFER/Continuum Economics  
The latest IMF COFER data (here) shows that the USD still remain the dominant currency among central banks, with the Euro in 2nd place at 19.6% followed by the Japanese Yen and British Pound.  The Chinese Yuan i

December 15, 2023

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China Outlook: Headwinds To Growth
Paying Article

December 15, 2023 10:06 AM UTC

     Our Forecasts
Source: Continuum Economics
Policy Stimulus Insufficient to Stop Slowing   
China is facing a number of headwinds that will make 5% growth difficult to achieve in 2024. Key issues include:   
·        Property construction downturn.  China authorities have undertaken

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China Data: Retail Sales and Industrial Production Diverge, but No PBOC Cut
Paying Article

December 15, 2023 7:48 AM UTC

Figure 1: China Retail Sales Yr/Yr (%) 
Source: Datastream/Continuum Economics  
November data from China shows a mixed picture.  Industrial production rose +0.9% on the month, while the Yr/Yr at 6.6% compared to expectations of 5.7% (the Yr/Yr is distorted upwards by the last phase of COVID lockd

December 08, 2023

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2024 Policy Easing in China
Paying Article

December 8, 2023 3:52 PM UTC

November 28, 2023

Do China Want Strong Yuan?
Paying Article

November 28, 2023 12:01 AM UTC

On the chart, USD/CNH has turned up from the 7.1285 low to consolidate sharp losses from the November high. Consolidation around the 7.1500 level tracing out a bear flag and see risk for break of the 7.1285 low to further extend losses from the Sep high to retrace gains from the January low. Break w

November 22, 2023

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Chinese Yuan Bounce Overdone
Paying Article

November 22, 2023 12:56 PM UTC

The CNY recent rally against the USD is largely driven by the softer tone of the USD across the board.  However, interest rate differentials will likely remain at current wides until Q3 2024 and will then only narrow slowly.  Meanwhile, foreign investors continue to liquidate China assets on conce

November 15, 2023

China Data Mixed, but No PBOC Cut
Paying Article

November 15, 2023 8:51 AM UTC

Figure 1: China Economic Surprise Index
Source: Datastream/Citibank
October data from China shows a mixed picture. Yr/Yr Industrial production and retail sales were slightly stronger than expected at 4.6% and 7.6% respectively. However, on the month industrial production grew 0.4% and retail sales a m

November 13, 2023

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China: Five Headwinds To Long Term Growth
Paying Article

November 13, 2023 8:15 AM UTC

Concerns about long-term growth in China into the 2nd half of the decade are increasing, which is a concern for global growth given China's contribution to global GDP over the past 20 years.
Figure 1: China GDP Growth Forecasts to 2030 (%)
Source: Continuum Economics
China's Long-Term Growth Problem

November 09, 2023

China CPI and November/December Easing?
Paying Article

November 9, 2023 7:30 AM UTC

Figure 1: China Headline and Core CPI inflation
Source: Datastream  
Pork prices helped to drag the headline inflation down, as excess pig production continues to be evident in the farming sector.  Core CPI inflation at 0.6% remains a better indication of the underlying inflation momentum, which arg

October 30, 2023

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Taiwan: Gray Warfare, Rather than Blockade/ Invasion
Paying Article

October 30, 2023 8:18 AM UTC

With the Taiwan election in January expected to re-elect the anti-China DPP, and the U.S. focused on Ukraine and Middle East, how will the Taiwan situation develop before and after the election and in the coming years? 
Figure 1: Taiwan Scenarios for the Next 5 Years 
Source: Continuum Economics 
Mo

October 25, 2023

China Fiscal Easing To Under Pin 2024 Growth
Paying Article

October 25, 2023 10:50 AM UTC

Figure 1: China Primary and Overall Budget Deficit/GDP (%) 
Source: IMF/Continuum Economics
The Yuan1trn increase in the 2023 budget deficit is to be channelled to increased local government spending on infrastructure including disaster reconstruction and prevention.  Though officially the target is

October 18, 2023

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China Q3 GDP Surprise, But Momentum Mixed
Paying Article

October 18, 2023 7:18 AM UTC

Figure 1: China GDP Yr/Yr (%)
Source: Datastream/Continuum Economics
The Q3 quarterly change at 1.3% is better than the 0.9% rise expected and keeps the Yr/Yr rate from falling too far (Figure 1).  With Q4 2022 having been mixed, even a weak Q4 quarterly change should now ensure that the authorities

October 13, 2023

China: CPI Sluggish But Fiscal Policy Rather Rate Cut Next?
Paying Article

October 13, 2023 7:53 AM UTC

Figure 1: China Headline and Core CPI (%) 
Source: Datastream/Continuum Economics 
Fiscal Policy Stimulus  
The September headline CPI came in lower than expected at zero Yr/Yr, as food prices dragged on the index – food supplies were plentiful ahead of golden week.  The core inflation rate remai

September 26, 2023

China Outlook: Slowdown, As Policy Stimulus Not Enough
Paying Article

September 26, 2023 10:08 AM UTC

Our Forecasts
Source: Continuum Economics
Policy Stimulus Insufficient to Stop Slowing 
Our GDP forecast looks for a slowing to 4.0% in 2024 from 4.8% in 2023 for a number of reasons.
Figure 1: Cumulative YTD Million Square Meters Residential Real Estate Development Versus Investment in Real Estate De

September 15, 2023

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China: August Data Stabilises but More Q4 PBOC Easing To Come
Paying Article

September 15, 2023 6:40 AM UTC

Figure 1: Residential Property Investment YTD (%) 
Source: Datastream/Continuum Economics 
August Data Some Stability, But 
The good news is that August retail sales (4.6% Yr/Yr v 3.0% expected) and industrial production (4.5% Yr/Yr v 3.9% expected) were better than expected and show stabilisation i

August 21, 2023

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China: 1yr LPR Cut Only and RRR Next Given Yuan Concerns
Paying Article

August 21, 2023 6:42 AM UTC

Figure 1: RRR for Big Banks (%) 
Source: Datastream/Continuum Economics 
RRR Cut Next Step 
Double disappointment on the LPR with a 10bps rather than 15bps cut on the 1 year LPR and no change for the 5yr rate. The latter has the market puzzled, given last week’s 15bps reduction in the PBOC medium-

August 18, 2023

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Financial Markets: U.S. (Still) More Important Than China For Now
Paying Article

August 18, 2023 7:31 AM UTC

Markets are focused on China credit tensions, as well as the ongoing DM rate tightening story centred on the U.S. What will be most important into the autumn?
Market Implications: U.S. equities are out of line with the rise in bond yields and we see still see a correction for the S&P500 to 4200 by en

August 16, 2023

China 2023 Outlook Cut to 4.9%
Paying Article

August 16, 2023 9:26 AM UTC

Our Forecasts
China H2 Difficulties 
We are revising down our 2023 GDP forecast to 4.9% from 5.5% for a number of reasons (see Our Forecasts).Key issues include 
Figure 1: Annual China Real GDP (%) 
Source: Datastream/Continuum Economics

August 15, 2023

China: MTF Cut Arrives Early, But More Rescues and Stimulus Needed
Paying Article

August 15, 2023 8:03 AM UTC

Figure 1: 1yr PBOC MTF Rate (%)  
Source: Datastream/Continuum Economics 
July data shows a weaker than expected profile for the economy. Yr/Yr retail sales at +2.5%, YTD Yr/Yr slowing to 7.3% versus 8.2% in June, plus a stalling of monthly growth in retail sales show that consumer momentum is runni

August 14, 2023

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China Property Crisis Spreads to Markets: Waiting for A Rescue
Paying Article

August 14, 2023 12:23 PM UTC

Reports that a major China property developer is looking to extend maturing Yuan bonds after missing USD bond payments last week, plus reports that a wealth management company has delayed paying clients, has caused new jitters about the property spill over into Chinese financial markets. 
Market I