Outlook
We keep our forecast for 2022 at 2.7% (below consensus at 3.5%) and 5.7% for 2023 (above consensus at 5.2%). The economy continues to struggle with three strong headwinds: a) zero-covid policy, b) property crisis and c) fading global demand. Chinese stimulus continues to increase and is proves a floor under growth. But it cannot kickstart the economy as long as the cloud of uncertainty over covid remains and the property crisis continues. Exports are now also likely to struggle as the US and euro area are expected to enter recession. We look for a recovery in 2023 on easing covid policy and a gradual lift to housing.
China today
Growth. PMIs dropped back in August, but the credit impulse is still robust. Retail sales surprised to the upside in August but remain weak. Confidence is low. The property sector is still in a deep crisis although stress among developers has eased somewhat lately.
Inflation. PPI inflation declined further to 3.5% in August coming from 13.5% in October. CPI inflation declined to 2.5% in August from 2.7% in July, still below the 3% target.
Monetary policy. PBoC has kept the RRR rate unchanged since April but has cut interest rates on 22 August by 10bp, mortgage rate by 15bp . M1 growth has picked up.
CNY. The yuan seeing another leg of weakness against USD. Pressure still up in USD/CNY.
Stock markets. Stocks lower on growth concerns, US tech restrictions and global recession fears. The China USD offshore high yield rate has come down lately but is still above 20%.
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
Recommended Content
Editors’ Picks
EUR/USD stabilizes near 1.0800 as trading action turns subdued
EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.
GBP/USD extends sideways grind above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.