16 May 2022 A Change of Tune from the PBoC Amidst a Slump in Lending

The PBoC has adopted new language in the wake of a slowdown in bank lending...

...But we think this is unlikely to signal a sudden pivot in monetary policy, given other constraints.

The PBoC has no choice but to accept a higher debt ratio, unless it wants to deepen the recession.

Craig BothamChina+

12 May 2022 Food is Driving Up Chinese Inflation, but the Core Rate is Falling

Chinese CPI inflation jumped in April, due to soaring food prices, but that will not worry the PBoC.

Zero-Covid has pushed up food prices, even as it depresses core inflation.

The PBoC has joined fiscal policymakers in making announcements with no new information.

Craig BothamChina+

10 May Trade Disruption Builds for China, as Restrictions Tighten

Zero-Covid caught up with Chinese exports in April, as inventories were exhausted...

...But demand played a role too, with higher energy prices dragging down trade with Japan and Europe.

The fundamental backdrop for the renminbi is deteriorating, highlighted by plunging FX reserves.

Craig BothamChina+

25 Apr 2022 The BoJ will Remain Indifferent as Inflation Approaches Its Target

Japanese inflation is still rising, and is all but guaranteed to break through its target in April...

...But the BoJ has already indicated it has no intention of changing tack; rates won't rise this year.

Policymakers are flirting with the idea of currency intervention, but Kuroda won't take the lead.

Craig BothamChina+

22 Apr 2022 The PBoC Buckles Up for the Renminbi's Wild Ride

China's currency is finally succumbing to pressure from multiple fronts, and has further to fall.

The renminbi poses a key constraint to PBoC policy, which Beijing will ultimately override.

April export data from Korea show that China's bat- tle with Covid will weigh heavily on global trade.

Craig BothamChina+

21 Apr 2022 China Drags on Exports, Adding to Japan's Problems as the Yen Drops

Lockdowns and shuttered factories in China appear to be the culprit behind slowing Japanese exports.

Further weakness seems inevitable as Chinese policy tightens, and regional supply chains collapse.

Underperforming exports again raise questions about the benefits of a weaker yen.

Craig BothamChina+

19 Apr 2022 Caught on the Horns of a Dilemma, with Chinese Characteristics

China's economy beat expectations in Q1, but is still falling short of the 2022 growth target.

The GDP data probably overstate economic growth, but either way things will get worse in Q2.

The battle with Covid is proving extremely costly; it will necessitate more stimulus, and soon.

Craig BothamChina+

14 Apr 2022 Zero-Covid Weighs on Trade, and Obliterates Domestic Demand

China's trade surplus enjoyed a final lift in March, as import demand collapsed, and exports rose...

...But look through the seasonal distortions, and exports were weaker than they appeared.

Beijing has promised to offset some of the pain from zero-Covid, but stimulus looks light, to us.

Craig BothamChina+

12 Apr 2022 Plenty of Scope, and Need, for Further Easing in China

China's inflation outlook remains very different to most major economies, despite the energy shock.

The PBoC is able to ease further, with inflation far from its target, but is proving reluctant.

Private sector demand for credit still looks soft, and the PBoC’s power is limited, absent fiscal action.

Craig BothamChina+

1 Apr 2022 A Sharp Slowdown for China in March, but No New Stimulus, Yet

• China's economy is groaning under the strain of increasingly restrictive zero-Covid policies.
• Factory closures and lockdowns took a heavy toll on both manufacturing and services in March.
• Policymakers are relying on the existing toolkit, deployed more rapidly, for now.

Craig BothamChina+

28 Mar 2022 More of the Wrong Sort of Inflation for the BoJ, as the Yen Plummets

• Energy and food push inflation higher, and Japan is set to beat its target next month...
• ...but the BoJ won't be moved, as demand-pull inflation remains as elusive as ever.
• Yen weakness is the biggest challenge to the BoJ's position, and likely will force a shift by H2.

Craig BothamChina+

22 Mar 2022 Korean Exports Falter as Demand and Supply Issues Bite

• Preliminary trade data from Korea point to a loss of momentum for global trade in March.
• War and Covid have tightened some bottlenecks, but demand is also under pressure from oil prices.
• The PBoC again opted not to ramp up monetary easing, despite recent messaging from Beijing.

Craig BothamChina+

21 Mar 2022 The BoJ Splits from the Pack, as Energy Costs Climb

• Japan is not entirely immune to global inflation shocks; CPI is rising as energy costs surge.
• The BoJ, however, has the luxury of choosing the sort of inflation it wants, and will not be hiking.
• Don't get too excited by rumours of a turnaround in Chinese policy; nothing much has changed.

Craig BothamChina+

16 Mar 2022 Stronger than Expected, but for How Long, as Headwinds Build

• China's state sector led a rebound in economic growth in early 2022, as investment surged.
• Data is always noisy at this time of year, however, and the surge is driven by frontloading spending.
• Growth will likely slow by April, given soaring Covid cases and base effects, prompting more easing.

Craig BothamChina+

14 Mar 2022 Chinese Stimulus Underwhelms as Risk Appetite Remains Muted

• Monetary easing is yet to result in more credit reaching the private sector, as lending slows.
• The state sector is still the driving force behind credit expansion, amidst elevated risk aversion.
• We expect the policy response to strengthen now the NPC is over, but remember, stability is the goal.

Craig BothamChina+

10 Mar 2022 Chinese Inflation Approaches a Nadir, but It's Complicated

• Energy and food are set to drive Chinese inflation dynamics, but base effects will play a big part.
• Global commodity prices are surging, but the link to domestic consumer prices is modest.
• The PBoC will stay dovish, and may ease more ag- gressively, due to—not in spite of—the cost shock.

Craig BothamChina+

8 Mar 2022 China's 2022 Work Report, Road Map or Wish-List

• Slower export growth provides a taster of the challenges facing China's economy in 2022.
• The Work Report—a government scorecard and road map—suggests a reliance on infrastructure...
• ...but convincing local governments and banks to do their part is going to be difficult, and risky.

Craig BothamChina+

7 Mar 2022 The War in Ukraine Brings More Pain for Chinese Industry

• Soaring energy prices will hit Chinese corporates harder than households, and Beijing will have to act. 
• The PBoC will not be turning hawkish, despite the shock to inflation, instead boosting SME support. 
• China's battle to support manufacturers is likely to renew tensions over its industrial policy this year. 

Craig BothamChina+

4 Mar 2022 No End Yet to Zero-Covid, Despite Viral Fatigue for Chinese Services

• Press headlines around the end of China's zero- Covid stance have generated great excitement...
• ...But in reality, the policy shift looks as distant as ever, even if clarity is to be welcomed.
• Services will face persistent headwinds this year, boosting reliance on state support for growth.

Craig BothamChina+

2 Mar 2022 Winter's Chill Starts to Fade in China, but Spring Isn't Here Yet

• China's activity surveys were better than expected in February, and a touch of optimism is warranted...
• ...but should be freighted with caution, given holiday effects, and evidence that demand is still soft.
• Policy stimulus is feeding through, but stability is the watchword, not explosive growth.

Craig BothamChina+