October 24, 2022

China’s Economy at a Glance – October 2022

Growth rebounded in Q3, but base effects flattered the results


  • China’s latest national accounts data show its economy expanded by 3.9% yoy in Q3. By historical standards, this rate of growth is not particularly strong (particularly when compared with pre-pandemic rates) and this increase is somewhat inflated by base effects – given that Q3 2021 was negatively impacted by the Delta wave of COVID-19 and electricity shortages hitting a number of provinces.
  • We have not fundamentally changed our views around China’s economy this month. The slightly stronger than expected growth in Q3 bumps up our forecast for 2022 to 3.4% (from 3.3% previously). Our forecasts for 2023 and 2024 are unchanged at 5.0% and 4.5% respectively, and weaker demand from advanced economies will require growth to be driven by the domestic economy.
  • China’s industrial production growth accelerated in September – increasing by 6.3% yoy (from 4.2% yoy previously). The strength of this increase may be somewhat overstated – given that China’s industrial sector was negatively impacted by energy shortages in September 2021.
  • Growth in China’s fixed asset investment edged higher in September – our estimates suggest that real investment rose by 4.6% yoy (from 3.1% yoy in August). State-owned enterprises recorded stronger growth than private firms, with manufacturing and infrastructure investment expanding rapidly, while real estate continued to contract.
  • Real retail sales growth fell back into negative territory – contracting by 0.7% yoy (compared with a 2.2% yoy increase previously). The increase in real sales in August was in part related to the Delta wave of COVID-19 that led to weaker conditions in August 2021.
  • In the first nine months of 2022, new credit issuance increased by 11.9% yoy to RMB 27.7 trillion. Bank loans continue to account for the largest share of total credit issuance and loans grew by 3.4% yoy. Non-bank lending rose by 30.5% yoy in the first nine months. The key driver over this period was government bond issuance – up by 33.8% yoy – however this rate of increase has slowed in recent months. In addition, shadow bank lending decreased by a smaller amount in this period.
  • The PBoC maintained its Medium Term Lending Facility (MTF) rate unchanged in September. As we have noted in recent months, the effectiveness of monetary easing is questionable at present – with low interbank interest rates implying excess liquidity. Banks have a lot of funds available for lending, but there is little demand from the private sector – in part connected to the deterioration in the property sector, but also the weakness in household activity.

For further details, please see China’s economy at a glance (October 2022)

Markets Today – The Cool Out

Markets Today – The Cool Out

1 December 2023

After what has been a solid month for equities and bond investors, month end flows have probably play their part in the price action overnight, US equities have lost momentum, UST have led a rise in core global bond yields and the USD is stronger. US and European inflation releases favoured the notion the Fed and ECB are done with their respective tightening cycles.

Markets Today – The Cool Out
Markets Today – Sweet Spot

Markets Today – Sweet Spot

30 November 2023

Bond markets have been supported by some market-friendly data and while Fed speakers were again mixed, it was the more dovish remarks that captured attention.

Markets Today – Sweet Spot