The latest piece of Chinese data to hit those post-Q1 GDP nerves is today’s HSBC/Markit services PMI.
It gave a April reading of 51.1, down sharply from 54.3 in March, and was the lowest since August 2011: Read more
The first one probably needs no introduction:
After eight years and much delay, China’s State Council has released its long-awaited plan for addressing income inequality. It seems everyone agrees it hits all the right notes, without persuasively committing to many concrete changes. Read more
You may be feeling China overload after the latest round of GDP and other economic data out on Friday. We are. But it’s usually right about that moment of fatigue that a subject begins to become really interesting again.
The head of China’s statistics bureau declared on Friday that the workforce shrank in 2012; most forecasts hadn’t expected this to happen until 2015. So it’s probably a good moment to debunk any suggestion that the first quarter of year-on-year GDP growth means the Chinese economy is sailing into a calm new era where growth stabilises at about 8 per cent — not quite the 10 per cent of many recent years, but the new normal that reflects a more balanced economy. Read more
A great new year piece from Standard Chartered’s China economist Stephen Green. The country’s economy, he writes, is “running along at a reasonable pace” as 2013 begins. But potential growth is already sliding, he says, and clouds are gathering…
We all know that China’s current growth model is not sustainable. It is not going to collapse tomorrow, but there are clearly problems with it – and we believe those problems have gotten worse in the past couple of years.
The imbalances are not just rich/poor, rural/urban, and east/west, writes Green. There are four key dynamic imbalances affecting the country: Read more
China’s markets are zooming upwards, and quite honestly who knows why? It could be something to do with the big politburo meeting yesterday, at which various pronouncements about the economic outlook were made. We’re not sure the remarks should be interpreted as meaning that continued large scale, infrastructure-focused stimulus is a certainty. Read more
As in, does it exist?
Wang Tao at UBS takes aim at the “Rmb1tn stimulus“; she thinks it is not really real: Read more
Another month, another round of mostly disappointing China data. Not that everyone is overwhelmed by the gloom, as some are pointing to positive indicators in property as well as increased infrastructure investment, but more on that later.
August trade data released earlier today revealed that exports were up 2.7 per cent year-on-year. This is better than July’s dire 1.0 per cent year-on-year increase but still well short of the usual China trend, as the FT explains here. Read more
A trillion renminbi! That’s almost like a real 2008-style stimulus (which was Rmb4tn). And beleagured Chinese stocks reacted accordingly:
Namely, property:
News that the Chinese city of Changsha, in the central Hunan province, plans to spend Rmb829m, or 150 per cent of its GDP, made waves last month. It’s a fairly small city and one that was reportedly booming just weeks earlier.
We recently made the point that slowing growth was leading the central government to back away from its tentative plans to rebalance the economy, and instead doubling down on imbalances with its push to keep GDP growing through investment, particularly in infrastructure. Read more
Meanwhile, in the domestic banking scene… [See part 1 on capital outflows here.]
China’s financial system stability is increasingly intertwined with its shadow banking system — which is big, according to various tallies. Bank of America Merrill Lynch says it accounts for a quarter of all bank loans, with the biggest segments being wealth management products or WMPs (8 per cent) and trust companies (8.9 per cent). Fitch Ratings says that WMPs now account for about 16 per cent of all commercial bank deposits; KPMG says trust companies will overtake insurance to become the second-biggest component of the financial sector. Read more
Izzy wrote in May how China’s Rmb exodus is a huge (and still little-explored) story for the world economy, and it’s one that won’t be going away as China recorded a net capital account deficit in Q2. We’re wondering now how this might collide with risks to domestic liquidity — specifically, whether a combination of Rmb exodus and local banking problems might affect the People’s Bank of China’s ability to maintain financial stability?
A very brief recap on the Chinese foreign reserves-domestic liquidity nexus: Read more
There are two ways that China’s economic future is viewed today.
First, there’s the China which is going to move coherently towards a more consumption-heavy economic mix — the oft-mentioned “rebalancing” that is needed to address its unusually capital-intensive economy. An oped by GK Dragonomics’ Andrew Batson says this means the China naysayers, focusing on the woes of Sany or growing coal stockpiles, are misguided: Read more
China’s trade data for April came in well short of expectations on Thursday, and was followed by a raft of more disappointing data on Friday.
Here are a few highlights, courtesy of BAML’s China economists Ting Lu, Xiaojia Zhi and Larry Hu: Read more
Does China’s decision to expand the allowed trading range for the yuan signal something significant for the country’s economy? Like, everything is roses?
We’re just asking because a Reuters analysis piece argues that this is the case: Read more
What IS a hard landing in China?
Well, BAML’s latest survey of fund managers defines it as less than 7 per cent growth. And incidentally, only 8 per cent of those surveyed believe it will happen, half the percentage of the November survey. Read more
Answer according to your view on the very important question of China’s economy rebalancing towards a higher consumption-to-GDP ratio.
The debate isn’t really about whether China needs to or will inevitably rebalance, but whether it already has begun to do so. A note from Barclays Capital by Yiping Huang made the case that household consumption as a proportion of GDP is already beginning to rise. Read more
The Barclays Capital note we discussed earlier this week, postulating that China had already begun to see a critical increase in its household consumption-to-GDP ratio, has generated a few questions over email.
So, we’re going to go into it in a little more detail. But stay tuned — this is interesting. Really. Read more
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