Consumer prices in China increased by just 0.4% in the year to September, the National Bureau of Statistics said on 13 October. The outturn was 0.2 percentage points below the expectations of the consensus of economists polled by Reuters. Chinese inflation outturns coming in below consensus should not be entirely unexpected — as the chart below shows, this has tended to be the case for several years. An additional worry for policymakers in the PRC is that core inflation dropped to just 0.1% in the year to September, reflecting continued weak demand in the Chinese economy. Moreover, we do not

China initiated a large-scale leveraging process during the Global Financial Crisis (GFC), with authorities implementing an unprecedented stimulus package that was based on increased lending to several institutions, which included SOEs, property developers and the newly created local government financing vehicles (LGFV). This large stimulus was successful in preventing a recession in China, but it came at the cost of growing financial risks and debt, considering the amount of credit deployed in such a short period, fuelling several asset bubbles in property, stocks and commodity markets. After some initial deleveraging attempts by Beijing (which included policy rate hikes and tighter

Based on official data, China appears to have started off 2024 on the right foot, with the pick-up in several indicators (including industrial production, retail sales and exports) implying that the economy is improving. Indeed, China’s National Bureau of Statistics released a robust first quarter GDP growth rate of 1.6% quarter-on-quarter, up from the previous 1.2%. Year-on-year, the growth figure was a notable 5.3%. This release surprised on the upside, prompting widespread upward revisions to the forecast growth rate for the year, including those surveyed by Reuters Polls. Interestingly, however, Fathom’s China Momentum Indicator (CMI) paints a rather different picture:

The Chinese economy grew faster than expected in the first quarter of this year, according to official data. The National Bureau of Statistics of China said that GDP increased by 5.3% in 2024 Q1 compared to a year earlier – up from 5.2% in the previous quarter, and beating expectations in a Reuters poll of analysts of a 4.6% expansion. On a quarterly basis, the NBS said that the economy grew 1.6% in 2024 Q1, up from 1.2% in the previous quarter. A strong Q1 performance bodes well for the country being able to meet its annual growth target of

The theory of comparative advantage states that economies should specialise in those goods and services that they are relatively more efficient at producing. If they do this, and trade for the goods and services in which other countries have a comparative advantage, then both sides will achieve the most efficient outcome possible. This is the world that proponents of globalisation have long argued for. However, a number of people would argue that we are not in that world. Various highly ranked officials in the US and Europe have recently voiced concern that Chinese government support (including subsidies and artificially low

In a recent series of client presentations, Fathom Consulting delivered its latest Global Outlook, Spring 2024. This explored several possible scenarios for the future of the global economy, financial markets and geopolitics. These scenarios were summarised here, in a previous edition of News in Charts. As noted, Fathom’s central scenario argues that the worst is over post-COVID. Consumer confidence looks to echo that more optimistic outlook, as shown in the chart below. Although confidence remains lower than usual, it is on the rise across the US, EA and UK. In short, we conclude that things look to be on the

Each year, Fathom Consulting updates its proprietary RiCArdo dataset, which includes detailed export data for more than 200 countries. The dataset allows us to track trade developments between countries, including export market share and revealed comparative advantage (RCA) across more than 1000 different goods and services subcategories. The RiCArdo dataset also includes trade data grouped by the sectors which constitute the ‘Made in China (MIC) 2025’ plan. The MIC 2025 plan was introduced by the Chinese government in 2015 with the goal of transforming the country’s enormous manufacturing base into a high-tech powerhouse, and the RiCArdo dataset gives insights into

Chinese equity markets have underperformed their global peers significantly since the start of last year. Even companies like BYD — which recently overtook Tesla as the world’s largest seller of electric vehicles — have underperformed, despite relatively attractive valuations. Refresh this chart in your browser | Edit the chart in Datastream   Refresh this chart in your browser | Edit the chart in Datastream   Want more charts and analysis? Access a pre-built library of charts built by Fathom Consulting via Datastream Chartbook in LSEG Workspace.   A range of short-term factors, including a weak outlook for China’s GDP growth, deflation and trade tensions with key trading

China’s fixed ambition has for many years been to become the richest economy in the world, and it has adapted its tactics to the geopolitical environment several times in order to achieve this goal. The most recent tactic is what Fathom calls the ‘broken wing’: allaying the fears of its trading partners abroad by drawing attention to the many structural weaknesses that beset the Chinese economy. Those weaknesses are not new, but the tactic of acknowledging them now certainly is. Refresh this chart in your browser | Edit the chart in Datastream Thanks to its accession to the World Trade Organisation in

Persistent errors in consensus forecasts are a sign that economists have failed to recognise a trend. While there have been cycles in China’s inflation surprises (as measured from the Reuters Poll of economists), more often than not those surprises have been to the downside. Moreover, not only have those errors tended to be negative, but the magnitude of the ‘miss’ has grown over time. There is plenty of talk about the risk that China’s economy ‘Japanifies’ — i.e., that it endures a prolonged period of low growth, low rates and low inflation. Inflation is now essentially at zero in China

China’s official purchasing managers’ index (PMI), which captures monthly changes in business activity in the manufacturing sector, increased to 50.2 in September, up from 49.7 in the previous month. A number above 50 indicates growth rather than contraction. On the surface, this is good news for China, after five consecutive months of readings below the 50 threshold. However, Caixin’s measure of China’s manufacturing PMI paints a less optimistic picture, with a reading of 50.6 but moving in the opposite direction from the official index, decreasing from 51.0 in the previous month. According to Caixin, although the production sub-component expanded at

Fathom has been warning for years that things have gone badly wrong in China’s real estate market, a fact which is now becoming widely appreciated as some of China’s biggest property developers default on their debts. The country is in the grip of a house price bubble which has put home ownership out of the reach of many ordinary people, while at the same time suffering from a monumental over-supply of partially completed and unoccupied housing stock which is being held back from the market. With strong vested interests on both sides, policymakers walk an increasingly narrow path to prevent