
Recovering from the Lockdowns
GDP only grew 2.5% y/y in H1. As the pandemic shock has been gradually under control and the start of various economic stabilization policies, the recovery growth in June has lifted the Q2 growth to achieve positive growth at 0.4% y/y, contributing to the path “back to normal”.
In H1, industrial output rose 3.4% y/y, down 3.1 pps from Q1. In H1, investment growth rate was 6.1% y/y, down 3.2 pps from Q1, but still 1.2 pps faster than 2021. The continuing real estate cooling does not see any time ending.
Pandemic lockdowns suppressed consumption. Retail sales of social consumption goods fell -0.7% y/y, down 4 pps from Q1. Survey data shows Chinese consumers are pessimistic about future income growth putting more constraint on future consumption recovery. In H1, exports rose 13.2% y/y. In June alone, exports rose 22% y/y, accelerating since April, and is an important force lifting economic recovery.
In H1, PPI rose 7.7% y/y. CPI increased 1.7% y/y. Low inflation benefits from the recovery of supply chains, domestically and internationally. However, future inflation pressure is still high. The main financial indicators were loosened somewhat countercyclically. At the end of June, M2 rose 11.4% y/y, up 0.3 pps from May, and up 1.7 pps from Q1, slowly picking up. M1 rose 5.8% y/y, up 1.2 pps from May, and up 1.1 pps from Q1.
China’s unemployment situation is worsening. According to the National Bureau of Statistics, the government official source, China’s youth unemployment rate for ages from 18 to 24 hit an all-time high of 19.3% in June. It was a sharp rise from 18.4% in May and marked a year-on-year increase of 25%. We believe the unemployment might not pose a society crisis. Parents in China usually provide living net. The unemployment leans more to friction cause. For example, many campus recruitments were suspended because of the pandemic.
Government will continue its effort to bring the economic activities to a higher level. However, it seems not necessary for China to stimulate the economy by additional measures. On July 20th, China’s Prime Minister Li Keqiang stated that China will not adopt large stimulus policies.
Signs of monetary and fiscal expansion at last
Because of the long Chinese New Year holiday, the statistics bureau only announced price, financial and PMI data in February. Producer prices grew more slowly. PPI rose 9.1% y/y, down another 1.2 pps from December. The ex-factory price index of industrial goods rose 8.85% y/y, while CPI growth also slowed. CPI rose 0.9% y/y in January, down 0.6 pps from December. In particular, food prices fell -3.8% y/y, down 2.6 pps from December, dragging CPI down 0.72 pps. That is the leading factor lowering CPI. The falling price levels offer ample room for further money expansion.
At the end of…
Lockdown Halts Powerful Economic Recovery
The COVID-19 lockdowns in Shanghai and some other cities since late March have halted the strong economic recovery. In Q1, GDP was up 4.8% y/y, up 0.8 pps from Q4 2021, but 0.2 pps lower than in Q1 2020. Industrial output rose 6.5% in Q1, up
2.6 ppts from Q4, but down 1 pps from January-February. Investment rose 9.3% y/y in Q1, up 4.4 pps from 2021, but 2.9 pps lower than in January-February.
In March, overall PMI, manufacturing PMI, and non-manufacturing business activity PMI were 48.8%, 49.5% and 48.4% respectively, all falling steeply from the previous month, demonstrating that the…
Signs of monetary and fiscal expansion at last
Executive summary
Because of the long Chinese New Year holiday, the statistics bureau only announced price, financial and PMI data in February. Producer prices grew more slowly. PPI rose 9.1% y/y, down another 1.2 pps from December. The ex-factory price index of industrial goods rose 8.85% y/y, while CPI growth also slowed. CPI rose 0.9% y/y in January, down 0.6 pps from December. In particular, food prices fell -3.8% y/y, down 2.6 pps from December, dragging CPI down 0.72 pps. That is the leading factor lowering CPI. The falling price levels offer ample room for further money expansion.
At…
Yuan may appreciate further in 2022, but not hit 6 to the dollar
Growth continues to be weak. In November, industrial output grew 3.8% y/y, down 1.1 pps from Q3, much lower than the growth rates of recent years. Investment is also low, and was up 7.9% y/y, and down 1.2 pps from January-June. Its adjusted growth rate is instead negative. The real estate market is still cold: sales were down -14.2% y/y in November.
Consumption rose 3.9% y/y in November, down 1 pps from October, and its adjusted growth rate was 0.5% y/y, hitting its lowest level this year. But trade is still strong. Imports were up 26% y/y, and up 9.8 pps from Q3. Exports were up16.6% y/y.
…Growth weakens, though more structural reforms are underway
Growth has weakened, especially in services. In August, industrial output grew 5.3% y/y, and was up 11.2% from August 2019, with an annualized growth rate of 5.4%, down 0.2 ppts from July, and down 1.2 ppts from Q2. The service production index has slowed since Q2, and grew only 4.8% y/y in August, after being further hit by the COVID outbreaks, down 2.9 ppts from Q4 2020, and down 2.1 ppts from 2019.
Investment was up 8.9% y/y January-August, and increased 8% from August 2019, with an annualized growth rate of 4%, down 0.5 ppt from H1. Real estate is cooling dramatically, to the 2008…
Growth may be slower
The Chinese economy has been stably rising in Q2. GDP was up 7.9% y/y, and up 11.4% from Q2 2019, with an annualized growth rate of 5.5%, up 0.5 pps from Q1. Industrial output was up 8.9% y/y, and up 13.7% from Q2 2019, with an annualized growth rate of 6.6% y/y, slightly lower than in Q1 but higher than the pre-pandemic 2019 level; specifically, growth in June was 6.5%.
Investment was up 12.6% y/y, and increased 9.1% from Q2 2019, with an annualized growth rate of 4.4% y/y, up 1.8 pps from Q1, and down 1 pps from 2019. In Q2, retail sales of social consumption goods were up 9.5% from Q2…
Stronger yuan against a weak dollar
Growth was stable in May. Industrial output rose 8.8% y/y, and increased 13.6% from May 2019, with an annualized growth rate of 6.6%. Investment rose 15.4% y/y, and increased 8.5% from May 2019, with an annualized growth rate of 4.2% y/y -- still in a low growth zone.
Consumption has recovered further. In May, retail sales of social consumption goods rose 9.3% y/y from May 2019, with an annualized growth rate of 4.5%, up 0.2 pps from April. Trade has been strong since the beginning of this year, especially for imports, which are growing robustly. In May, imports rose 39.5% y/y. Exports rose…
Robust growth without monetary loosening
Growth is stable. Industrial output was up 9.8% y/y in April, and up 14.1% y/y from April 2019, with annualized growth of 6.8% y/y, the same as in Q1, and higher than the pre-pandemic levels in 2018 and 2019. Investment is still weak, and rose 8% y/y from April 2019, with an annualized growth rate of 3.9% y/y, up 1.3 pps from Q1. We expect economic growth to be strong, though fiscal and monetary policy are not loosening. Our forecast is based on strong trade growth from global economic recovery, commodity price appreciation and demand recovery.
Consumption recovered slowly. In April,…
Import rally
GDP was up 18.3% y/y in Q1, and up 10.3% from Q1 2019, with an annualized growth rate of around 5%. In this report, we mostly use Q1 2019 as the benchmark period, because the major shock from the pandemic in February 2020 makes Q1 2020 data hardly comparable. The adjusted growth rate was lower than in Q4 2020, and higher than in Q3 2020, and can be viewed as stable.
In Q1 2021, industrial output was up 14% y/y from Q1 2019, with annualized growth of 6.8%, slightly lower than in Q4 2020. In particular, industrial growth in March reached 12.8% y/y, with an annualized growth rate of 6.2% y/y,…
Consumption set to rebound
Economic recovery is still going strong. In January-February, industrial output was up 35.1% y/y, and up 16.9% compared to January-February 2019. Annualized growth was 8.1% y/y, higher than all quarterly growth since 2015, and up 1 pps from Q4 2020. Since the Chinese economy was shut down to a large extent last February due to COVID-19, we also look at growth rates for most indicators by comparing their performance with the same period in 2019.
In January-February, investment fell -35% y/y, and was up only 3.5% y/y from the same period in 2019. The investment slowdown is mostly due to the…
Economic resilience will stoke export growth
Producer prices increased fast between June 2020 and January 2021, and finally turned positive. The ex-factory price index of industrial goods rose 1% m/m, and 0.3% y/y. PPI rose 1.4% m/m, and 0.9% y/y. We expect the ex-factory price index to soon rise higher than 5% y/y, and PPI will rise higher than 8% y/y.
CPI fell -0.3% y/y. However, its seasonally adjusted growth rate was 0.3% m/m. The rise of the CPI level is mainly driven by the strong rebound of meat prices. The rebound is temporary, and linked to the Spring Festival effect. We expect the meat price will continuously drop for the…
Exports are surging
Industrial output rose 7% y/y in November, reaching its fastest growth rate since April. Investment rose 2.6% y/y, and was up 0.8 pps from October.
Consumption was the worst-hit macro variable of the pandemic. But retail sales of consumer goods recovered further, rising 5% y/y, up 0.7 pps from October. Its real growth rate was 6.2% y/y, and was even higher than in November 2019.
CPI fell -0.5% y/y in November, turning negative for the first time, hit by a fall in pork prices. The ex-factory price index of industrial output fell -1.5% y/y, and PPI fell -1.6% y/y, up 0.6 and 0.8 pps…
RCEP, the largest free-trade agreement deal in history
In October, industrial output rose 6.9% y/y, the same rate as in September, and the highest rate this year, up 2.2 pps from October 2019. The national service production index has been rising since the economic opening in February, and achieved positive growth in May. It rose 7.4% y/y in October, up 2 pps from September, and up 0.8 pps from October 2019. Investment rose 1.8% y/y in October, up 1 pps from September.
Retail sales of social consumption goods recovered further, and were up 4.3% y/y, and up 3.4 pps from Q3. Their real growth was 4.6% y/y, up 5 pps from Q3.Even the pandemic’s…
GDP growth hits 4.9% in Q3,with surging exports
GDP was up 4.9% y/y in Q3, a rise of 1.7 pps from Q2, but still 1.1 pps lower than in Q3 2019. Industrial output was up 5.8% y/y in Q3, up 1.4 pps from Q2, and up 0.8 pps from Q3 2019.
Investment was up 8.8% y/y, up 5 pps from Q2, and up 4.1 pps from Q3 2019, with investment in manufacturing rising fastest, by 9% y/y, up 10 pps from Q2. Retail sales of social consumption goods were up 0.9% y/y, and up 4.8 pps from Q2 -- and their real growth rate was -0.4% y/y.
CPI was up 2.3% y/y in Q3, down 0.4 pps from Q2. In particular, CPI rose only 1.7% y/y in September, an accelerated decrease.…
Recovery reaches pre-pandemic level
Industrial output was up 5.6% y/y, up 0.8 pps from July, reaching the average growth rate of 2019. We expect growth might slightly exceed the pre-pandemic level for the rest of the year. Investment fell -0.3% y/y January-August, up 1.3 pps from previous months. The driving force is switching from state to private investment, reconfirming the return to pre-pandemic economic recovery.
Consumption was up 0.5% y/y, the first turn to positive growth this year, and up 1.6 pps from July. Exports were up 11.6% y/y, above 10% y/y for two consecutive months. Despite the U.S.-China conflict, exports to…
Recovery slows, but continues
Industrial output rose 4.8% y/y in July, the same rate as in June, down 1.1 pps from Q4 2019. Investment grew 8.3% y/y, up 2.7 pps from June, and up 2.9 pps from Q4, and is still mainly driven by state investment, with a growth rate of 12.7% y/y. The best performer among fixed asset investments is real estate, with a growth rate of 11.6% y/y in July, up 3.7 pps from Q2.
Consumption is still weak, and was down -1.1% y/y, and up 0.7 pps from June, showing customers’ caution over COVID-19. In July, exports grew 10.4% y/y, up 6.1 pps from June, and up 6.4 pps from H2 2019, possibly due to the…
Strong rebound, even without a major stimulus
GDP rose 3.2% y/y in Q2 -- a remarkable performance amid global pandemic. In June, industrial output was up 4.8% y/y, and up 0.4 pps from May, though has still not reached the pre-pandemic level, and was down 1.1 pps from Q4 2019. Investment, mostly driven by state investment, was up 5.6% y/y, up 1.7 pps from June and down 0.2 pps from Q4 2019.
Retail sales of consumption goods fell -1.8% y/y in June, up 1 pps from May. Exports rose 4.1% y/y in June, achieving positive growth for three consecutive months, averaging 4.5% y/y, higher than the growth rate of H2 2019. Imports were up 6.2% y/y,…
COVID second wave lowers our growth forecast
Industrial output rose 4.4% y/y in May, up 0.5 pps from April, comparable to its pre-pandemic level, and was down just 1.5 pps from Q4 2019. Investment was up 3.9% y/y, and up 3.1 pps from April, down 1.5 pps from Q4. Government investment is the main force lifting overall investment growth.
Consumption demand continued to recover in May. Retail sales of social consumption goods fell 2.8% y/y, up 4.7 pps from April. The global pandemic is not showing any sign of abating, and is heavily impacting trade. In May, exports were up 1.4% y/y, down 6.8 pps from April, while imports plunged 12.7%…
Moving toward pre-pandemic levels
The National Committee of the Chinese People's Political Consultative Conference (CPPCC) convened the annual two sessions on May 21st. Although for the first time the government did not set an annual growth target - possibly due to so many COVID-19 uncertainties ahead - we expect the implicit growth target is 1.8% for now, given the projected deficit and inflation numbers.
The economy is quickly recovering, as the pandemic has come under control. In April, industrial output growth turned positive, and was up 3.9% y/y, and up 5 pps from March, down only 2 pps from the pre-pandemic level, in…
Focusing on “six stabilities,” while struggling to grow
The Chinese economy was hit hard by the coronavirus in Q1, and GDP fell -6.8% y/y. Because the virus is almost contained in China, economic activities have since March been gradually picking up, and there were clear signs of recovery. Industrial output was down -1.1% y/y, up 12.4 pps from January-February.
Consumption has been hardest hit, largely due to quarantining. Retail sales of social consumption goods fell -19% y/y in Q1, and -15.8% y/y in March, up 4.7 pps from January-February. Trade has so far been largely unaffected. Exports in March were up 2.8% y/y after adjustment, down only…