28 June 2022 Chinese Profits Under Pressure, and Stimulus is Still Lacking

Chinese industrial profits fell again in May, despite the reopening from lockdown. 

Government support likely propped up profits in some sectors, demand still looks weak. 

The PBoC is injecting liquidity again, but this is about quarter-end management, not stimulus. 

Craig BothamChina+

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+

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+

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+

24 May 2022 A Reprieve for Korean Exports, but Global Trade Probably won't Follow

Korean exports accelerated in May, but this is unlikely to herald a broader global revival.

The data also suggest a partial recovery in China, as restrictions ease, but energy prices are a key driver.

The renminbi has gained on dollar weakness, and hopes of tariff reductions, but it will weaken again.

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+

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+

29 Apr 2022 The BoJ Fiddles While the Yen Burns, the MoF Readies the Hose

The BoJ shrugged off currency fears, keeping rates on hold and even leaning into YCC.

Acting as a sign of determination to keep rates capped, markets duly reacted by dumping the yen.

Japan’s Ministry of Finance reacted swiftly, and irritably; intervention now looms on the horizon.

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+

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+

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+