Please see below selected pre-2016 intelligence about China. This is a synthesis of major recent developments at corporates, business schools, thinktanks, media, commentators, and other key influencers.
- In 2016 China will once again be hugely important in determining the path of the world economy and the direction of capital flows. But this time the story will not be about a slowing economy. As recent industrial production numbers indicate, measures to stimulate the economy are having an impact. Investment is picking up in response to stronger infrastructure investment, especially from local governments, reflecting the easing of financing constraints on them. State-owned enterprises have also been investing more heavily.
- Equities across the globe were undermined by losses in mainland China after a near 3 per cent drop on the Shanghai exchange triggered fresh commodity losses. As many markets reopened following the Christmas weekend break, China’s Shanghai Composite fell 2.6 per cent after weak industrial profit data for November dashed hopes of an end-of-year rally. The data, released on Sunday, showed profits earned by Chinese industrial companies fell 1.4 per cent last month - a sixth-consecutive month of year-on-year declines.
- China’s activity data was stronger than expected in November, with factory output growth picking up to a five-month high, signalling that a flurry of stimulus measures from Beijing may have put a floor under a fragile economy. Still, analysts believe more policy steps are needed to weather nagging headwinds from a cooling property market, risks from high domestic debt levels, and weak global demand as financial markets brace for interest rate rises by the US Federal Reserve.
- Meanwhile, foreign direct investment (FDI) into the Chinese mainland rose 1.9 percent year on year to 64.9 billion yuan ($10.4 billion) in November, the Ministry of Commerce said. The growth slowed from a 4.2 percent rise in October. or the first 11 months, FDI, which excludes investment in the financial sector, stood at 704.3 billion yuan, up 7.9 percent from the same period last year.
- Activity in China's services sector expanded at a slower pace in November as new orders weakened. The Caixin/Markit Purchasing Managers' Index fell to 51.2 in November from a three-month high in October of 52.0. A reading above 50 points signifies growth on a monthly basis, while one below that points to a contraction.New business rose at a slower pace of 51.1 - down from 52.9 in October - showing weaker domestic and external demand while employment in services rose only marginally, with the smallest increase in three months.
- China's foreign trade dropped 4.5%year on year to 2.16 trillion yuan (337 billion U.S. dollars) in November, the ninth-consecutive monthly decline. China’s foreign-exchange hoard meanwhile fell in November to its lowest level in more than two years, reigniting concerns about Beijing’s ability to stem the outflow of capital from the world’s second-largest economy.
- A report by Standard & Poor’s warned that creditworthiness at China’s big state firms has worsened in recent years. The ratio of gross debt to earnings has increased to more than five on average.
- The latest snapshot of manufacturing activity by the Chinese Federation for Logistics and Purchasing showed activity slipping for the fourth month in a row, falling further below the 50 no-change mark to 49.6 in November from 49.8 the previous month. Economists at ANZ Bank said the data could prompt yet another rate cut from China's policymakers.
- In a sign of growing confidence that China's stock markets are stabilising, the country's securities regulator lifted an order that required brokerages each day to buy more shares than they sell for any proprietary trading. But China's crackdown on financial markets in the wake of a stock slump in the summer continued as anti-corruption investigators opened probes into two of China's largest brokerages and censured four insurance executives.
- Mainland China’s overseas direct investment increased by 16.3% in the first 10 months of 2015 from a year earlier to $92.5 billion, the Ministry of Commerce said, underscoring the country’s growing international economic clout.
- Capital flowed into China last month for the first time since an unexpected currency devaluation in August shook investor confidence in the economy, easing fears over financial stability following an unprecedented bout of outflows.
- China's Next Opportunity - Sustainable Economic Transition is a report by Paulson Institute on sustainable growth in China, with a focus on the City Cluster of Beijing-Tianjin-Hebei as a case study.
- Another poor month for Chinese trade sparked debate about whether the government will have to do more to stimulate the economy. Exports fell by 6.9%, in dollar terms, in October from the same month last year and imports were down by 18.8%. The figures for both measures were much worse than analysts had forecast. Industrial production also grew by less than had been expected.
- Nevertheless the Communist Party and the national government set a 6.5%target for annual economic growth from 2016 to 2020. The announcement was an apparent attempt to temper expectations that China's slowing economy will rebound to anything near the double-digit growth of recent decades.
- New data out this week sheds some more light on the dynamics of the pressures facing China's industrial sector. Industrial profits are down 1.7% on last year, according to the most recent data - EIU, 29th October 2015
- How big a risk does the slowing Chinese economy pose? - PwC, 28th October 2015
- In the third quarter the Chinese economy grew by just 6.9% year-on-year according to official data, and probably by a percentage point or two less in reality. Yet bank loans increased by 15.4% in the third quarter compared with the same period in 2014. Having released a torrent of credit to buoy the economy during the financial crisis, China - The Economist, 24th October 2015
- China’s investment into Africa appears to be another casualty of the slowdown in the world’s second-largest economy. Chinese cross-border investment in greenfield projects and in expansion of existing projects in Africa fell by 84% in the first half of this year compared with a year earlier, from $3.54bn to $568m - Financial Times, 21st October 2015
- As China weakens, recession stalks North Asia - Reuters, 21st October 2015
- China's commodity companies are drowning in a sea of debt" - Business Insider, 21st October 2015
- China’s statistics bureau said on Monday that gross domestic product rose 6.9 per cent in the third quarter in inflation-adjusted terms, down from 7 per cent in the first two quarters and 7.3 per cent for full-year 2014. It was the slowest quarterly growth rate since the first quarter of 2009 but higher than expectations of 6.7 per cent in a Bloomberg poll - Financial Times, 20th October 2015
- China’s exports fell by 3.7% in September, in dollar terms, compared with the same month last year and imports were down by 21%, raising more concerns about the country’s slowing economy. However, China’s imports of some commodities, such as copper, have increased by volume on some measures, adding to the uncertainty about how fast the economy is actually growing - The Economist, 17th October 2015
- PwC's own Economics team launched its monthly Global Economy Watch for October. This month, our economists focused on China’s slowing economy as policymakers manage the rapid cooling of its debt-fuelled property market, and analyse how this poses a major challenge for some economies.
- "China's new path to sustained growth" argued that there will be increasing demand from China for high-quality services and high-tech products, and China’s outbound investment will be more active. Indeed, especially in trade in services and two-way investment, the possibilities for strengthening cooperation between China and the U.S. are almost limitless - Bloomberg Views
- China capital outflows hit record in August on yuan weakness - Business Times
- Chinese authorities are facing a slowing economy and a slump in share prices that has alarmed global investors - Financial Times, 16th September 2015
- Growth in China's investment and factory output in August has come in below forecasts, in a further indication that the world's second-largest economy is losing steam - BBC, 13th September 2015
- Trade data suggested a big decline in China’s imports and exports in August. The central bank said that its foreign-exchange reserves dropped by a record $94 billion last month, due to interventions in currency markets - The Economist, 11th September 2015
- China leading world towards global economic recession, warns Citi - The Telegraph, 9th September 2015
- China’s Exports Down 6.1% In August, Imports Fall 14.3%, But Trade Surplus Sharply Up - International Business Times, 8th September 2015
- Rising labour cost in China is one reason why companies are looking elsewhere for manufacturing activities - EJ Insight
- Will the past week be remembered as the one that put an end to China’s rise? - Eurasia Group, 31st August 2015
- China's Slowdown - Financial Times, 26th August 2015
- Chinese stocks plunged more than 8% in panic selling, with flagship indexes smashing key support levels and posting their biggest one-day percentage losses since the height of the global financial crisis in 2007 - Reuters, 24th August 2015
- China’s stockmarkets remained turbulent, including a 6% plunge in the Shanghai Composite Index on August 18th - The Economist, 23rd August 2015
- Still plenty of concern about china's markets, as the shanghai composite index suffered another round of serious drops last week - Eurasia Group, 03 August 2015
- Corporate giants sound profits alarm over China slowdown - Financial Times, 30th July 2015
- Lagarde plays down China stock jitters - Financial Times, 28th July 2015
- China stocks take the lead in Asian markets recovery - CNBC, 29th July 2015
- China markets rout resumes with 8.5% Shanghai sell-off - Financial Times, 28th July 2015
- Beijing faces dilemma after China stock market rout - Financial Times, 28th July 2015
- Despite some subsequent correction, the Shanghai Composite and Shenzhen Composite both initially plunged about 30% from their highs due to concerns that Chinese stocks are in a bubble. As one tweeter put it, "China has lost 15 Greeces in market cap in three weeks".
- Indeed, the Chinese government intervened to try to stem the popping of a stockmarket bubble. While the impact on the real economy in the short term is likely to be slight, for the EIU there are two big reasons to be more pessimistic longer-term. The first is that the Chinese leadership firmly stamped their names on the intervention. It looks to be their first major misstep, and could be the precursor to some internal wrangling. The second is what the intervention says about the likelihood of medium-term economic reform: certainly it does not seem to reflect policymakers committed to giving markets a 'decisive' role, as promised in 2013 by the Chinese Communist Party government.
- In short, a number of respected commentators are now advising that, despite the understandable short-term focus on Greece, we should be paying at least as much attention to China, not least because there are other weak signals emerging in the wider Asia region - e.g. global manufacturing activity slowed and edged closer to stagnation in June, with Asia lying at the centre of global manufacturing weakness; factories there reported a fourth successive monthly deterioration in business conditions.