China Watch

Strengthening against US dollar for 8 consecutive months, Renminbi (Chinese yuan) has accumulated gains of about 10% since June 2020. We believe the rally is overextended as China's economic recovery has shown signs of losing steam while yield differential between US and China has narrowed over the past few...

China’s inflation surprised to the upside in December. Thanks to food price, headline CPI improved to +0.2% y/y in December, compared to deflation of -0.5% a month ago. Food inflation rebounded to +1.2% y/y, after contracting -2% a month ago, as pork price deflation narrowed to -1.3% from November’s...

The latest set of economic data indicates economic recovery in China continued. Growth in industrial production improved slightly, while manufacturing investment accelerated, thanks to strong exports growth. Retail sales growth accelerated, suggesting internal circulation has taken effect. Industrial production expanded +7% y/y in November, inline with expectations and up +0.1...

The country recorded deflation for the first time since October 2009. Headline CPI contracted -0.5% y/y in November, compared with consensus of a flat reading and a +0.5% gain in October. Food inflation dropped -2% y/y in November following a +2.2% gain in October. Of which egg and pork...

The latest set of economic data in China reflects that recovery continued in October. Growth was seen in both the supply and demand sides. However, while supply side continued to expand more than anticipated, the consumer spending did not perform as strong as market expectations. PBOC has recently mentioned...

China’s inflation moderated in October. Headline CPI eased sharply to +0.5% y/y, from +1.7% a month ago. The decline was mainly driven by food price, of which growth decelerated to +2.2% from September’s +7.9%. Non-food price actually stayed flat at 0%, while core CPI also steadied at +0.5%. Concerning...

The latest set of China's macroeconomic data is mixed in the headline. GDP growth in the third quarter came in below market expectation. However, major indicators such as industrial production, retail sales and fixed asset investment all beat consensus, confirming recovery is underway. Against this backdrop, we expect PBOC...

China’s headline CPI moderated to +1.7% y/y in September, from +2.4% a month ago. This has missed consensus of +1.9%. The weakness was mainly driven by pork inflation which slowed to +25.5% y/y, from +52.6% in August. This contributed about 0.7 percentage point to headline CPI’s moderation. Fresh vegetable...

PBOC announced over the weekend to lower the FX risk reserve ratio for forward foreign exchange sales from 20% to 0, effective October 12. The move is likely a response to the strength in renminbi (a.k.a. RMB, CNY). The central bank pledged to “maintain the flexibility of the RMB...

The latest economic indicators show that China’s economy continued to recovery in September. NBS’ official manufacturing PMI climbed +0.5 point higher to 51.5 in September, beating consensus of 51.3. The non-manufacturing PMI also increased to 55.9 from 55.2 in August. The composite index gained +0.6 point to 55.1 last...

The latest set of macroecononmic indicators in China suggests that economic activities surprised to the upside in August. Growth in industrial production accelerated while retail sales gained first the first time since February. Better-than-expected data in August signals that it is less likely for PBOC to cut interest rates. Industrial...

Headline CPI moderated to +2.4% y/y in August, from +2.7% a month ago. High base and softened growth in food inflation was the key reason for the slowdown. Food price rose +11.2% y/y, decelerated from +13.2% in July. This was mainly driven by the sharp moderation of pork inflation...

China's manufacturing PMI (by Caixin) rose to almost a decade high of 53.1 August, from 52.8 a month ago. This indicates that China’s manufacturing activities have been expanding over the past 4 months and the rebound has accelerated. The accompanying report noted that output and new orders showed biggest...

Renminbi (a.k.a. RMB, CNY) has strengthened against US dollar over the past 3 weeks. While the broad-based USD weakness is the key reason, PBOC's neutral policy action over the past months has also led to renminbi's appreciation. We expect the phenomenon would persist, supporting renminbi, in coming months. PBOC announced...

The latest set of macroeconomic data suggests that the pace of recovery in China remained slow, as a result of flooding and second wave of coronavirus outbreak. Improvement industrial activities decelerated, while retail sales continued to shrink. Weak domestic spending was evident in subdued core CPI released earlier this...

China’s trade data surprised to the upside in July. This was mainly driven by strong exports, offsetting decline in imports. Exports gained +7.2% y/y in July, following a 0.5% increase a month. This has beaten consensus of a -0.6% drop. From a month ago, exports rose +5.7$, after climbing...

China’s official PMI report reveals that economic activities continued to expand in July. However, the pace of recovery varied across sectors. Manufacturing and construction activities improved faster than expected, thanks to better overseas demand government’s stimulus measures. However, the services sector was dragged as household demand remained weak. Although...

PBOC has left the policy rate, the 1-year loan prime rate, at 3.85% in July. The 5-year loan prime rate also stays at 4.65%. The decision has been widely anticipated, as the medium lending facility (MLF) rate, the guidance rate for the LPR, was also kept unchanged at 2.95%...

GDP expanded +3.2% y/y in 2Q20, beating consensus of +2.4%. From a quarter ago, the expanded jumped+11.5%. Concerning major macroeconomic indicators in June, industrial production (IP) rose +4.8% y/y in June, in line with expectations and accelerating from +4.4% in May. Urban fixed asset investment (FAI) declined -3.1% y/y...

Headline CPI improved further to +2.5% y/y in June, from +2.4% a month ago. This came in line with market expectations Core CPI (excluding food and energy) eased to +0.9% y/y, from +1.1% in May. While staying in the negative territory, PPI improved to -3% y/y in June, up...