Asia | China | Monetary Policy & Inflation
Chinese trade data earlier this week showed imports growth falling deeper into negative territory (-2.1% YoY), while credit data due in the coming days is expected to show the earlier sharp increase in loan extension coming to an end. And unlike elsewhere in EM, August inflation data dropped back, partly due to lower food prices (2.4% YoY versus 2.7% in July) and core inflation has been weak (unchanged versus July at 0.5% YoY).
While China’s headline GDP may well be propped up by the strong export performance, growing weakness in China’s domestic economy suggest that any ability to boost China-centric markets is limited. The import bill has undoubtedly benefited from lower commodity prices but this does not fully explain the very weak number as China’s manufacturing surplus also increased over recent months. With export growth running well above global aggregates China is also increasing its share of global trade.
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Chinese trade data earlier this week showed imports growth falling deeper into negative territory (-2.1% YoY), while credit data due in the coming days is expected to show the earlier sharp increase in loan extension coming to an end. And unlike elsewhere in EM, August inflation data dropped back, partly due to lower food prices (2.4% YoY versus 2.7% in July) and core inflation has been weak (unchanged versus July at 0.5% YoY).
While China’s headline GDP may well be propped up by the strong export performance, growing weakness in China’s domestic economy suggest that any ability to boost China-centric markets is limited. The import bill has undoubtedly benefited from lower commodity prices but this does not fully explain the very weak number as China’s manufacturing surplus also increased over recent months. With export growth running well above global aggregates China is also increasing its share of global trade.
August data on aggregate financing and money supply are due for release by Tuesday. The monthly change in both new loans and wider aggregate financing is expected to be up versus last month’s net change. But given the sharp run up in credit in February/March the sequential change in net new credit extension as a share of GDP has very likely peaked.
Our China growth tracker, which combines changes in various commodity prices and timely real economy data, has also lost momentum over the past few weeks. The short-term (3-month tracker) has dropped lower while our longer-term measure is negative. China’s largest trading partners should take note.
Caroline Grady is a Senior Researcher at Macro Hive. Formerly, she was a Senior EM Economist at Deutsche Bank and a Leader Writer at the Financial Times.
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