Paid Members Public China – worse than it looks If there was a surprise with the Q4 data, it was that the official measure of GDP managed to grow. The details were weak, with only household savings rising strongly. Those savings provide a platform for a rebound in 2023, though not if households think their income growth has permanently slowed. Paid Members Public China – property floor Official December data point to property prices bottoming out. That isn't unexpected, given the ending of zero covid and other signs that property prices have picked up. Cuts in mortgage rates suggest there could be quite a big bounce in prices, but that needs household confidence to recover. Paid Members Public China – not much change After a big fall in November, the trade data were less eventful in December, in MoM terms hardly changing at all. That means YoY growth is still deteriorating, and leading indicators point to that continuing through at least Q1. Paid Members Public China – end of the deflation scare Inflation ticked up in December, and it is fairly easy to predict that China's deflationary scare is over. It is more difficult yet to say what sort of inflation comes in its place. The ending of zero covid means higher inflation, but also erodes the usefulness of the usual leading indicators. Paid Members Public China – weak credit Credit and monetary data remain soft. In itself this isn't vital for markets, which can think the ending of zero covid matters more than anything else. But monetary data, particularly the willingness of households to embrace financial risk, will affect the sustainability of any upturn. Paid Members Public The China Diviner Policy statements have generated optimism of a shift in Beijing's economic strategy. But the language being used isn't so unusual, while the challenges the economy faces are. We still think changes in substance, as well as style, are needed, in particular material support for the household sector. Paid Members Public China – unsound footing The PMIs fell again in December, signalling that GDP probably contracted YoY in Q4. That is backward looking, and there will be recovery as China exits covid. But the weakness in consumer income confidence shown in the PBC's Q4 survey shows full recovery out of the covid trough isn't yet likely. Paid Members Public China – another bad month For the third time in as many years, China's GDP likely contracted in November. With zero covid ending and property policy reversing, there will be recovery through 1H23. But for a sustained pick-up, more policy help is needed for households. Paid Members Public China – taking stock Zero covid has come to a sudden end. That, and property loosening, will ensure economic recovery in 2023. But for next year to prove a real turning point - and justify a steepening of the curve - the government needs to announce tangible policies that boost household incomes and spending. Paid Members Public China – not much money Money and credit in November was soft. That probably reflects zero covid. With that now being reversed, credit should bounce - and with interest rates low, that bounce could potentially be big. That though is a risk case, offset by the depressed level of liquidity preference. Paid Members Public China – backward looking Inflation was soft in November, but with the exit from covid dramatically changing the short-term outlook for the economy, these price data are backward looking. Just how much core CPI can now rise will be indicated by inflation expectations and liquidity preference. Paid Members Public China – ouch Exports took a big step down in November. The out turn was probably worsened by China's covid problems last month, but tech exports have now fallen for four consecutive months, and leading indicators for China's exports point to more worsening to come. Paid Members Public China – weaker again The PMIs suggest renewed weakening of the economy in November. That perhaps explains the accelerated pace of property easing. That loosening is an important development, but as long as China remains mired in covid difficulties, the outlook for the economy will remain very difficult. Paid Members Public China – third time...unlucky? The population is starting to chafe against lockdowns, but isn't prepared for opening. The compromise path forward is rising covid cases signalling more eventual openness, but lockdowns continuing to be used to try to slow the spread of the virus. That's a very messy path for financial markets. Paid Members Public China - no liquidity flood Data released this week show the central bank's balance sheet continues to hardly grow, and depositors continue to move money into time deposits. That is happening even though real economy interest rates are at or near record lows. Paid Members Public China – property prices falling Property prices continue to fall, even though mortgage rates are likely at record lows. All the policy loosening of recent days should start to make a difference, but it is as yet difficult to imagine a big upswing in the property market. Paid Members Public China – a soft floor October data confirm the message of the PMIs that the cycle remains weak. There continue to some tentative signs of a floor, which has a bigger chance of holding given the policy moves of the last few days. But the softness of property sales suggest the foundations for any recovery remain weak. Paid Members Public China – Beijing blinks again The authorities have relaxed covid and property restrictions. It feels very unlikely that the economic disruption caused by efforts to contain the pandemic is yet over. But taken together, the policy shifts do further rebalance what previously were overwhelmingly downwards risks for the economy. Paid Members Public China - credit better than the headlines The monetary data aren't bullish, but are more constructive than the headlines suggest. That's because credit growth outside of government borrowing is rising. This keeps alive the possibility that China is through the worst, though such an interpretation is a stretch as long as M1 growth is weak. Paid Members Public China – is that it for deflation? In October, headline PPI fell back into deflation, and CPI inflation eased quite sharply too. But there are signs that China is nearer the end of this deflation shock than the beginning. Paid Members Public China – taking stock The two big recent catalysts have been 1) that the new leadership ends China's growth story; and 2) zero covid is about to end. All told, this chatter hasn't taken the market far. For the industrial cycle, there remain tentative signs of a bottom. Paid Members Public China - export growth stops YoY export growth fell to zero in October. More downside is ahead, though surging car shipments suggest autos might buck this trend. Import demand is also slowing. It should contract aggressively in the next 6M, though that looks pessimistic given commodity prices and imports in the PMI. Paid Members Public China - modest net outflows Early data show some deterioration in China's financial account in Q3. The shift though isn't as significant as might be expected, and the current account improved. The data won't do much to boost the CNY. But at face value, they aren't a reason for a sharper sell-off. Paid Members Public China - weak again The PMIs remain weak, with the only bright spots being construction, and prices. The cycle may have found a floor, but only a weak one. Paid Members Public China – summary slides Some slides from a brief presentation I gave yesterday. It was in three parts: the deflation problem; the short-term outlook; and the Congress contradiction.