21 June 2022 Monetary Policy Remains On Hold in China, Despite the Slowdown

Policy rates remain on hold in China, alongside a broader pause in monetary easing.

More accommodative policy seems unlikely to drive growth, given lacklustre credit demand.

Monetary policy needs fiscal help, if it is to regain traction, and not add to financial risks.

Craig BothamChina+

17 June 2022 Keep an Eye on Chinese Property, Amidst the Focus on Zero-Covid

China’s property market took another tumble in May, despite policy efforts to steady the ship.

Buyers are unlikely to return while so many developers look fragile, and employment is under pressure.

Real estate will be a headwind to economic growth for the rest of the year, and likely beyond.

Craig BothamChina+

13 June 2022 Price and Money Data Show Demand is Still Weak in China

Inflation data hint at weak domestic demand, but also point to disinflationary pressures from China.

Food prices are the main driver of CPI inflation, but the PBoC target will only briefly be breached.

Bank lending has turned a corner, but it doesn’t look like the private sector is benefitting.

Craig BothamChina+

PM Datanote: Money and Credit Growth, China, May

In one line: Valuation effects spare the PBoC's blushes

Craig BothamChina+

8 June 2022 The PBoC Remains Cautious, Despite the Push for Growth

China’s FX reserves rose slightly in May, snapping a run of declines, despite currency weakness.

We think the recovery was driven chiefly by valuation effects, given reports of continued outflows.

The PBoC would feel more comfortable easing if China really were experiencing net inflows.

Craig BothamChina+

1 June 2022 A Dead Cat Bounce for Chinese Activity, but Reanimation is Nigh

Chinese PMIs rose in May, but are still sub-50, signalling month-on-month declines.

We expect a return to growth in June, as zero-Covid restrictions ease further, but it will be gradual.

The latest stimulus announcements provide a touch of new money, but still look lacklustre.

Craig BothamChina+

25 May 2022 Japanese Manufacturing Falters in May, as External Demand Softens

Japanese flash PMIs for May show a domestic recovery facing headwinds from external factors.

The most obvious culprit is China’s zero-Covid policy, with restrictions loosening only slowly.

New stimulus from China is underwhelming, but, importantly, contains new money this time.

Craig BothamChina+

17 May 2022 Recession Now Looks Unavoidable for China, thanks to Zero-Covid

We are lowering our Chinese GDP forecast, as the data for April were closer to reality than expected.

Prolonged zero-Covid restrictions risk permanent economic scarring, limiting any rebound.

China’s property sector is a separate—and over- looked—drag on activity, and set to persist.

Craig BothamChina+

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+

PM Datanote: Money and credit growth, China, April

In one line: Monetary transmission broke down in April, echoing the broader economy 

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+

PM Datanote: Money and credit growth, China, March

In one line: Improving liquidity provision, but risk appetite is still muted

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+

China+ Data Note: Money and credit, China, February

In one line: Banks don’t want to lend, and households don’t want to borrow

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+

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+

24 Feb 2022 Ukraine, Energy Prices a Bigger Worry than Awkwardness for China

• Russia's invasion of Ukraine puts China in a tricky position diplomatically, but it won't mind too much...
• ...What matters more to China is the impact on energy prices, at a time of softening growth.
• Announcements signal more support from the centre, but bang-for-buck will be lower than usual.

Craig BothamChina+

11 Feb 2022 The State Sector Doubles Down as Risk Appetite Dwindles

• Record weakness in Chinese M1 growth is only partly attributable to seasonal and base effects...
• ...Weaker risk appetite, and softer economic activity, underlie the drop in liquid deposits.
• Credit growth continued to become more heavily dominated by the state in January.

Craig BothamChina+