April 2022 China Macro Data Recap

China’s April macroeconomic data reveal that lockdowns and COVID-related restrictions are causing the economy to contract, with industrial value-added declining by 2.9% y/y last month, and retail sales dropping by 11.1%. While consumption is taking the first hit, production is likely to drop off further in the months ahead, given ongoing logistical disruptions to supply chains and declining new orders. Credit data were severely disappointing in April and indicate continued weakness in credit and investment demand. The most important indicators to watch from here concern how fast property sales and freight activity might recover if COVID restrictions ease soon.

Posted May 18, 2022
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Supply Chain Disruptions Driving Inventory Growth

Chinese corporate inventories of finished goods are accumulating rapidly, as a result of disrupted supply chains caused by lockdowns and other COVID-related restrictions. There is a widening gap between overall industrial production and final demand as China’s current slowdown extends, similar to the inventory buildup in Q2 2020. While supply chain disruptions are temporary and likely to contribute to both domestic and exported inflationary pressures, the medium-term trends caused by rising inventories are fundamentally disinflationary, both within China and for global raw materials prices.

Posted May 13, 2022
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Zero COVID: Mapping the Way Out

China’s “zero COVID” policies are at a crossroads, given the rising economic and political costs of continuing on the current course. This note discusses how we expect COVID management to change in China from now, and how we can monitor those changes. We do not expect a public, high-profile reversal of Beijing’s stated “dynamic zero” strategy, which could stay in place for at least the entire year, and perhaps longer. But enforcement at local levels will gradually relax, and case levels will become less reliable and relevant in guiding local officials and Beijing’s responses. The key indicators to watch are not Beijing’s policy rhetoric but the actual flows of people and goods, which are more reliable indicators of the actual state of lockdowns or restrictions—and thus policy—on the ground.

Posted May 5, 2022
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