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+

6 May 2022 China's Labour Market is Under Increasing Pressure

The Caixin Services PMI plummeted again in April, as the zero-Covid vice tightened further.

The employment picture is darkening rapidly, and will be a major worry for policymakers.

We are still waiting for a material shift in policy, even so; announcements so far contain nothing new.

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+

29 Mar 2022 Weaker Chinese Profit Growth Heightens Political Risks

• Chinese industry faces rising costs, both from global markets and domestic Covid policies...
• ...Coupled with weaker demand, this implies that profitability will be under heavy pressure this year.
• Policy efforts to support China's struggling firms will likely raise tensions with trading partners.

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+

17 Mar 2022 Japanese Export Momentum Wanes, as Global Problems Mount

• Japanese exports bounced back in February, as holiday effects reversed, but should fade from here.
• Challenges are growing for both demand and supply, with no clear resolution in sight for either.
• China's property market shows no sign of recovery, and policymakers are getting nervous.

Craig BothamChina+

21 Feb 2022 A Brief Lull, but Japanese Inflation will Soon Jump, Relatively Speaking

Craig BothamChina+

17 Feb 2022 Pigs Might Fly, but they Bring Lower Inflation in their Wake

• Chinese inflation continued its decline in January, thanks to base effects and weak demand.
• The main constraint on PBoC action is worries over financial stability, not inflation.
• China should export disinflation in 2022, a soothing balm for policymakers outside China.

Craig BothamChina+

16 Feb 2022 Japan Returns to Growth, but the Bumpy Ride isn't Over

• Japanese GDP growth returned to positive territory in Q4, thanks to a rebound in consumption.
• Consumption will be under pressure in Q1, thanks to Omicron, but investment should recover.
• Chinese stimulus remains very modest, illustrated by a net withdrawal of liquidity this month.

Craig BothamChina+

14 Feb 2022 It's Clichéd, But Sometimes a Crisis Really is an Opportunity

• China saw another huge current account surplus in Q4, but it is under increasing pressure.
• The support provided to China's external balance by the pandemic will fade further in 2022.
• The renminbi should weaken on a sustained basis in H2, though pressure could show as soon as Q2.

Craig BothamChina+

10 Feb 2022 Regional Manufacturing Faces a Drag from China

• Regional manufacturing PMIs have diverged in recent months, thanks to Chinese factory closures.
• Japan and Korea likely will converge towards China, but should be cushioned by external demand.
• China's employment situation is getting worse, but policymakers are staying the course, for now.

Craig BothamChina+

7 Feb 2022 China's Battle with Omicron is Imposing Real Economic Costs

• China is struggling to contain Covid, despite more aggressive suppression policies.
• The cost of zero-Covid is rising with variant transmissibility, but a near-term pivot is unlikely.
• We expect China to stick to its guns in 2023, but the trade-offs are shifting.

Craig BothamChina+

18 Jan 2022 A Better Year for Consumption, but Now Normal Service Resumes

• Growth was stronger than expected at the end of 2021, but still slowed...
• The outsized contribution from both consumption and exports will now fade...
• ...as the central government takes centre stage, supported from the wings by the PBoC.

Craig BothamChina+

14 Jan 2022 Credit Growth is Grease to the Wheels, not Fuel for the Fire

• China's money and credit growth improved in December, but this isn't a stimulus surge.
• The authorities are laying down the groundwork to bail out swathes of the economy.
• We expect the Q4 GDP reading to be the weakest since the start of the pandemic.

Craig BothamChina+

4 Jan 2022 Bright in Patches, but a Largely Dismal End to China's 2021

• Despite some apparent good news, early data point to marginal weakening in growth in December.
• Policymakers are delivering more initiatives, but they will only cushion the fall.
• Bad news on Sinovac efficacy versus Omicron means reopening is pushed back a year, at least.

Craig BothamChina+

20 Dec 2021 The BoJ Takes Another Step Back, but Don't Call it Hawkish

• The BoJ kept its main policy tools unchanged in December, but tinkered around the edges.
• An announced reduction in corporate debt purchases had already begun in practice.
• The taper is offset by an extension of SME lending, which has been a bigger balance sheet driver.

Craig BothamChina+

29 Nov 2021 An Energy Boost Quickens the Pulse of Japanese Inflation

• Headline inflation in Japan is on the rise,though still driven by transitory factors.
• Underlying inflationary pressures remain weak, but should get a brief boost from fiscal policy soon.
• The newest Covid variant generates a huge amount of uncertainty, and carries large downside risks.

Craig BothamChina+

25 Nov 2021 Infrastructure Spending is Coming, but Less than you Hope

• Policymakers are low on options to support economic growth amidst multiple headwinds.
• Infrastructure investment is the surest way to ensure money is actually spent...
• ...But local governments may still have difficulties spending it, given a lack of viable projects.

Craig BothamChina+

23 Nov 2021 Bottlenecks and Chinese Policy to Ease, but Keep Calm

• Korean trade data show further signs of an easing in congested supply chains.
• Chinese policymakers turn more dovish, but no real relief for the property sector.
• Renminbi strength starts to bother the PBoC, but "two-way volatility" is more likely than devaluation.

Craig BothamChina+