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China
Le Xia
Chief Economist
The China Unit is made up of a team of economists based in Hong Kong. The team closely monitors developments in the largest economies of the region, including Greater China, India, Japan, Indonesia and the Philippines. In addition, the Chine Unit is responsible for analyzing trends related to Asia’s financial systems and assessing the risks faced by these economies. The team also conducts studies on important political, geopolitical and social issues in the region from a strategic perspective. The unit’s responsible is Le Xia.

Latest Publications

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China: Vulnerability sentiment improved notably in May

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Our China Vulnerability Sentiment Index (CVSI) improved notably in May, led by Housing, SOE and Shadow Banking components, which offset a deterioration in Exchange Rate Vulnerability Index. The improvement in CVSI reflects underlying investor confidence that macro-financial headwinds facing China still remain manageable amid policy efforts to anchor financial stability.

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China : PBOC tweaks model guiding Yuan fix to underpin financial stability

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On May 26th, the People’s Bank of China (PBOC) announced that, henceforth, it would add a ‘counter-cyclical adjustment factor’ to its model guiding daily USDCNY midpoint fixing. The tweak aims to reduce excess Yuan volatility and curb one-way bets by easing ‘herd behavior’, but risks backpedaling Yuan exchange rate regime to the one prior to the reform in August 2015.

Units:
Geographies:Asia China

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Financial deleveraging: two steps forward; one step back

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After months of persistent regulatory tightening in domestic financial markets, China’s authorities unexpectedly fine-tuned their stance of monetary prudence by injecting liquidity into the banking sector. We interpret the authorities’ strategy as “two steps forward one step back”. After the market stabilizes and absorbs their messages, they are set to leap forward again.

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Tracking chinese vulnerability in real time using Big Data

Document Number 17/13

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We develop an indicator to track vulnerability sentiment in China. In order to ensure robustness and depth, we use a combination of traditional macroeconomic and financial time series with textual analysis using Big Data techniques.The index is composed by the following dimensions: state owned enterprises; shadow banking; housing market bubble and exchange rate market.

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China | Vulnerability sentiment edging towards neutral

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Our China Vulnerability Sentiment Index (CVSI) moderated in April after improving since July 2016. The CVSI is now edging to neutral, however the components of the index show divergence. The moderation can be related to a decline in housing and FX components. The shadow banking component remained positive on a tighter monetary policy stance and macroprudential measures.

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China Economic Outlook. Second quarter 2017

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Q1 GDP edged up to 6.9% YoY, we expect 2017 annual growth rate would not deviate much from the newly set official target of around 6.5%. Prudent monetary policy and tight regulations start to effect .RMB exchange rate and foreign reserves has stabilised. Downside risks: housing bubbles ; currency depreciation; indebtedness of the corporate sector and shadow banking.

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China | Decline in foreign reserves won’t grind to a halt in 2017

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China’s foreign reserves seem to have stabilized at the beginning of the year. By decomposing the change of foreign reserves in 2016, we make projections of foreign reserves at end-2017 under two scenarios with distinct key assumptions. To avert a swift depletion of foreign reserves, the authorities need to prevent large swings in the exchange rate.

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China | Xiongan New Area Announced

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China announced the establishment of a new economic zone 100km South of the capital, Beijing. The Xiongan New Area will encompass three counties, including Xiongxian, Rongcheng and Anxin. The area will sit at the center of a triangle formed by the capital, Beijing; one of North China’s busiest port cities, Tianjin; and the capital of Hebei province, Shijiazhuang.

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Tracking Chinese Vulnerability in Real Time Using Big Data

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We develop a new indicator to track Chinese vulnerability sentiment in real time, combining Big Data with key financial indicators and official statistics. Our Chinese Vulnerability and Sentiment Index (CVSI) shows improving risk narratives since 2H16, in line with a pick-up in economic activity and a change in the policy mix put in place by Chinese authorities.

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China | Strong start to 2017 but headwinds abound

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Last year’s recovery continued into 2017. The latest data releases point towards another month of strong growth. In particular, Fixed asset investments and industrial production strengthened in February, while trade figures improved in line with a pickup in global trade. We expect growth to edge down towards 6.0-6.5% by year-end as headwinds continue.

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February PMIs show the recovery gains momentum while headwinds loom large

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China’s official manufacturing PMI (released by NBS today) picked up to 51.6 in February from 51.3 in January, well above market expectations (Consensus: 51.2).Both of the manufacturing PMI outturns have been above the 50 watershed level in 7 consecutive months since last August , suggesting the economic recovery continues with a solid pace.

Units:
Geographies:China Asia

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China Economic Outlook: First Quarter of 2017

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Economic activities continued to gain traction through Q4, enabling the authorities to meet their full-year target in 2016. The authorities recently fine-tuned their policy stance and put more emphasis on the stability of exchange rate. Downside risks: uncertainties from Trump’s policies ; currency depreciation; indebtedness of the corporate sector and shadow banking .

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China | On the way to the floating regime: RMB is set to depreciate

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We believe the exchange rate regime of the RMB will ultimately shift to a floating one as other major economies in the world. The floating of the RMB could come in the second half of 2018. Although certain degree of currency overshooting is inevitable, the final floating will help China’s economy restore its external balance and push up the exchange rate in the long run.

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China | Slowed growth on a soft-landing track

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China’s 2016 Q4 GDP came out today at 6.8% y/y, marginally higher than the market expectations and the previous reading. The 2016 full year GDP turned out to be 6.7%, surpassing the authorities’ target of 6.5%. December FAI and IP decelerated marginally from their previous readings. As growth headwinds are still ahead, we expect growth to continue its downtrend this year.

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China | Recovery appears resilient to headwinds

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November activity indicators came out today, indicating growth momentum continues. Among which, retail sales picked up significantly on strong auto sales while IP and FAI are in line with the market expectations. Altogether, economic activities continue to rebound from the previous downturn despite recent headwinds from housing market and RMB deprecation.

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China | Narrowed trade surplus and plunged foreign reserves

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The authorities have reported trade and foreign reverses data in November, pointing to a further weakening of the country’s external balance amid elevated global uncertainties in the aftermath of US president election and Italy constitutional referendum.

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China | Growth recovery continues

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China manufacturing sector maintains its momentum in November despite the recent tightening measures on the property market and the exchange rate market volatility. November PMI outturns indicate manufacturing activities continue to expand over past several months, underpinned by firms’ piling-up of their inventory level. We maintain our growth forecast at 6.6% for 2016.

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China | Revising outbound FDI figures downwards

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China’s share of global ODI stocks may be larger than previously thought if we factor in Hong Kong’s role as an offshore center. That said, our estimates show that MOFCOM figures overstate ODI flows, raising questions regarding the country’s status as a net creditor.

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China Economic Outlook: Fourth Quarter of 2016

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Global economic growth rate has improved slightly to around 3%. In China, economic activity continues to gain traction in Q4, which made us raise our 2016 full-year projection to 6.6% from 6.4% previously. However, the recently imposed tightening measures on property market and external financial tension add headwinds to growth going forward.

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China | Growth recovery continues

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October activity indicators came out today, most of which are in line with the market expectations and the previous month readings, such as industrial production and fixed asset investment. But retail sales dropped significantly. On the other hand, most credit indicators are below the market expectations. We maintain our full year GDP forecast at 6.6%.

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