Entries for 'Asia Pacific'
July 23, 2024
This note explains how the PBoC is managing CNY using a wide range of tools and how such interventions offer arbitrage opportunities and thus attract capital inflows. Despite these tools helping to stabilize CNY, we think the cost of intervention is too high.
July 18, 2024
China’s growth in 2024Q2 was disappointing as housing woes continue to weigh on the economy. The execution of fiscal deficit has been behind schedule and monetary policy has been unresponsive. We stand ready to lower China's growth forecast if there is no effective policy response in July.
July 16, 2024
The Bank of Korea (BOK) held its benchmark rate steady at 3.5% in July, despite the improving inflation situation. We see the BOK policy rate tracking the expected policy rate cuts in the USA, in order to reduce capital outflows and exchange rate volatility.
July 3, 2024
We recently brought ten IIF member institutions to Beijing and Shanghai. In the 17 meetings in three and half days, we met with policymakers, think tanks, local economists, and international institutions. This China Spotlight summarizes the takeaways from our investor trip.
June 13, 2024
Despite a record-high trade surplus, China’s foreign reserves haven’t increased much due to service deficits and the deterioration in non-resident capital inflows, particularly in FDI. The PBoC is diversifying its FR holding by paring back US treasuries and increasing the holding of gold.
June 3, 2024
China’s housing rout is already in its third year and is still unabated. The trajectory of home prices in China appears to be similar to the average of ten major housing crises in the world. More forceful policy response is needed before the housing rout causes greater damage, especially to banks.
May 29, 2024
After bottoming out over the past two years, the momentum of nonresident capital flows to emerging markets has shifted. This in large part due to a better EM outlook relative to advanced economies, with average EM output growth likely to be higher and EM interest rate spreads likely to widen.
May 16, 2024
There has been a growing international concern that China has been manufacturing beyond its capacity to absorb. While there is some cyclical evidence to support this claim, there doesn’t appear to be structural evidence, and some of the evidence is mixed.
April 30, 2024
Growth will remain robust, the external position is strong because of large capital inflows and a small CA deficit, favorable demographics combined with reforms would raise potential growth to above 7%.
April 29, 2024
China is striving for an economy less built with steel and cement but more powered by batteries and chips. While helping lift productivity, the advanced manufacturing sectors cannot create enough jobs. China still needs a more balanced growth with a growing service sector for job creation.
April 29, 2024
We expect growth to slow to 3.5% in 2024, due to stagnant oil production and moderation in private consumption. Risks remain balanced, trade diversification and higher oil prices are the primary upside risks while a potential shutdown of the CPC and secondary sanctions are the main downside risks.
March 28, 2024
The PBoC's monetary easing is not straightforward as it works on both the pricing and quantity side with numerous policy tools. While overly cautious on the rate cuts, the PBoC's easing on the quantity side has been more aggressive than most realize. More PBoC easing is needed in 2024.
March 27, 2024
After a surprising election result, in which PTI-backed candidates won a majority, a fragile coalition government was formed. We expect appetite for reforms to be weak, which may hinder or prolong negotiations for a new IMF program. The biggest hindrance will come from fiscal consolidation.
March 18, 2024
China's announced headline fiscal deficit of 3.0% of GDP is only the deficit of a narrow fiscal account. The consolidated fiscal deficit in 2024 can be as high as 8.2% of GDP, higher than last year's actual fiscal deficit of 7.0% of GDP.
March 6, 2024
China today bears uncanny similarities to 1990s' Japan in terms of demographics, housing correction, and debt overhang. On the other hand, there are also differences and the fate is not yet written. This note compares China's economy today with Japan's around 1990.
February 28, 2024
Despite the decent real GDP growth of 5.2% in 2023, Chinese investors and consumers are still gloomy. This is because deflation is hurting household incomes, corporate earnings, investor returns, and government taxes, which are all in nominal terms.
February 5, 2024
We believe Beijing still has the policy capacity to push China’s economy towards its growth potential. Though maintaining our above-consensus forecast for 2024 growth at 5.0%, we also caution the downside risk if the demand-side stimulus is inadequate.
January 24, 2024
China's shadow banks, especially the trust companies, are hurt badly by the deflationary economy and housing recession. The financial risk would be much greater if the regulators had not tightened the shadow bank regulations.
January 23, 2024
On January 11, the IMF approved the first review of the 9-month SBA program, releasing US$ 700mn in much needed financing assistance. While financing needs for the remainder of the fiscal year should be covered, a successor IMF program will be needed after the SBA ends in March 2024.
January 16, 2024
Chinese banks are facing mounting challenges amid the below-potential growth. The risks posed by the housing and local government sectors are not systemic. However, the deflation and falling lending rates are hurting banks badly.