ab c China Inside Out Global Research

Macro
China Economics
China Inside Out
How to sustain the economic recovery
abc
Global Research
 Growth should continue to bottom out
in the coming quarters as Beijing's
mini-stimulus package filters through
 But structural reforms are needed to
sustain a 7-8% growth rate in the
coming years
 The implementation of deregulation and
financial reforms the key to revitalising
private investment and consumption
China’s economy is perking up. The latest data points
suggest growth has bottomed after hitting a trough of
7.5% y-o-y in 2Q. Electricity output and rail freight volumes
were both up, while September’s HSBC PMI (flash)
expanded for the second consecutive month on the back of
modest gains of new business and production
We think this recovery is sustainable, unlike last year when
GDP growth rebounded in 4Q 2012 before slowing
unexpectedly. The key difference is that this round of
stimulus is more wide-ranging (covering infrastructure, IT
and VAT reforms), better suited to helping the economy
rebalance and less likely to exacerbate existing structural
problems that are being addressed. Bear in mind that Beijing
has plenty of fiscal and monetary ammunition left should it
need to protect growth later on.
26 September 2013
Qu Hongbin
Chief Economist, Greater China
The Hongkong and Shanghai Banking Corporation Limited
+852 2822 2025
hongbinqu@hsbc.com.hk
Sun Junwei
Economist
The Hongkong and Shanghai Banking Corporation Limited
+8610 5999 8234
junweisun@hsbc.com.cn
View HSBC Global Research at: http://www.research.hsbc.com
Issuer of report: The Hongkong and Shanghai Banking
Corporation Limited
Disclaimer & Disclosures
This report must be read with the
disclosures and the analyst certifications
in the Disclosure appendix, and with the
Disclaimer, which forms part of it
While the mini-stimulus should support a modest recovery
into 1H14, in order to sustain a growth rate of 7.5% or more,
we believe China needs to introduce and implement
structural reforms. While some reforms will likely involve
some short-term pain, we expect major reforms, due to be
announced in November, to boost pent-up private sector
demand for investment and consumption, putting growth on
a more healthy and sustainable path in the coming years.
We expect to see: 1) a reduction in the government’s role in
business and deregulation of state-dominated sectors
(especially services) in order to help private enterprise;
2) financial reforms to ease financing difficulties for private
investors and small business; and 3) improved income
distribution to unleash the consumption power through fiscal
reforms and deregulation, which should increase demand for
services such as IT, elderly and medical care, and culture.
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Macro
China Economics
26 September 2013
Contents
How to sustain China’s
recovery
3
Bouncing back
3
Why this recovery is sustainable
4
Reforms: getting the job done
5
Prices
22
Commodity prices
24
Money and credit growth
26
Interest and exchange rates
28
Employment and income
30
Asset markets
32
Data and forecasts
35
Charts
11
GDP
12
Industrial production
14
Private consumption
16
Fixed investment
18
Disclosure appendix
38
Trade
20
Disclaimer
39
2
China
36
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26 September 2013
How to sustain China’s
recovery
 Growth should continue to bottom out in the coming quarters as
Beijing's mini-stimulus package filters through
 But structural reforms are needed to sustain a 7-8% growth rate in
the coming years
 The implementation of deregulation and financial reforms key to
revitalising private investment and consumption
Bouncing back
Chinese data flows are looking more positive. The
upside surprises over the past two months imply
that the economy has bottomed out after falling to
7.5% y-o-y in 2Q. From exports and investment,
to industrial production (IP) and electricity
production, things seem to be picking up nicely
(See China: August data beat expectations,
adding evidence for recovery, 10 September
2013). The latest IP readings are consistent with
GDP growth of around 7.8% in 3Q (chart 1).
Chart 1. Growth is bottoming out
16
(%yr)
(%yr)
20
18
14
16
12
14
10
12
10
8
8
6
6
So, what’s driving the latest rebound? While
export growth recovered a little to 5-7% in the
July-August period from 2Q’s 3.7% y-o-y, the key
driver is on the domestic front as Beijing’s
fine-tuning measures have started to lift business
confidence and hold up investment demand.
Investment growth picked up to 21.4% y-o-y in
August from less than 20% a few months ago as
the acceleration in infrastructure investment offset
the weakness in manufacturing and property
investment (chart 2). Infrastructure-led investment
demand has led to producer prices bottoming out
as companies start to restock.
State-owned enterprises (SOEs) and large
companies with stronger government connections
stand out as the first beneficiaries. The large
companies’ sub-index of the official manufacturing
purchasing managers’ index (PMI) expanded faster
than the gauge for smaller companies.
00 01 02 03 04 05 06 07 08 09 10 11 12 13
GDP (Lhs)
IP (Rhs)
Source: CEIC, HSBC
3
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26 September 2013
Chart 2. FAI has picked up on the back of accelerating
infrastructure investment
60
(%yr, 3mma)
(%yr, 3mma)
60
50
40
50
40
30
20
30
20
10
10
0
-10
0
-10
05
06
07
08
09
10
11
Total FAI
Property
12
13
Infrastructure
Manufacturing
Source: CEIC, HSBC
But the good news has a broader base than that.
The HSBC China manufacturing PMI rebounded
more than expected to a six-month high of 51.2
(vs. 50.1 in August and Bloomberg expectations
of 50.9) in September’s flash reading (see HSBC
China Manufacturing PMI (Flash, Sep): Gaining
a firmer foothold, 23 September 2013). This was
the result of simultaneous improvement in
external and domestic demand conditions,
suggesting that GDP growth is likely to improve
on a sequential basis in the coming months.
Why this recovery is
sustainable
The key question now is whether this pick-up in
growth is sustainable, or whether we will see a
repeat of last year when GDP growth rebounded
in 4Q 2012 before slowing unexpectedly from
1Q 2013. We believe the rebound will continue in
the first half of next year for four reasons:
 The latest stimulus is more wide-ranging than
the subway-led investment projects approved
in the summer of 2012. The package includes
investment in infrastructure, IT, public housing
and environmental protection, as well as VAT
reform and tax breaks for small and
medium-sized enterprises (SMEs). This
provides a short-term counterbalance to the
slowdown in growth and also helps the
economy rebalance. It is less likely to
4
exacerbate existing structural issues which
Beijing is currently addressing and should help
generate better returns from projects linked to
the country’s broad urbanisation push.
 Second, the funding channels for these
investment projects are more diversified.
Non-loan financing now represents nearly
50% in total social financing and the average
monthly bond issuance rebounded in August
after the summer lull. Reform measures are
also in the pipeline, including the
encouragement of private investment, the
establishment of a railway development fund
and the expansion of bond issuance. At the
same time, monetary conditions remain
accommodative – in recent months,
M2 growth has been over 14.5% y-o-y and
total social financing growth above
20% – supporting a GDP growth rate of
above 7.5%.
 Third, the structural reforms running in
parallel with the latest stimulus are helping to
check tail risks like over-capacity and the use
of non-standard credit channels such as
shadow banking. In fact, the recent
improvement in the economy is creating
favourable conditions for Beijing policy
makers to push forward with reforms, even
though some reforms may involve short-term
pain. A comprehensive reform blueprint is
expected to be unveiled at the third plenary
session of the 18th CPC central committee in
November. We expect changes in
administrative, fiscal and taxation
systems, pricing schemes, financial markets
and urbanisation.
 Lastly, the full impact of Beijing’s fine-tuning
measures has yet to be felt. Most were
introduced in July and will take some time to
be fully implemented. The nationwide
extension of the VAT tax reform and tax
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26 September 2013
reductions for SMEs should make life easier
for small business, which is key to maintaining
stability in the labour market. Investment in
public housing, railway and IT infrastructure is
also set to gradually pick up pace.
Reforms: getting the job done
There is no doubt in our mind that putting the
right reforms in place will both help cement the
recovery and lay the foundations for the next leg
of growth. Much has been said about the reform
process but, for us, it is what is done that matters
rather than what is said. The reforms must contain
real measures that will deliver real change.
It is clear that sustainable growth would hinge on
what happens on the domestic front, rather than a
recovery in global demand. HSBC’s economics
team forecasts 2-3% global growth in the next two
years, still way below the level before the financial
crisis. Domestic demand has contributed more than
106% of China’s growth over the past five years
(which means net exports made a negative
contribution). To sustain domestic demand, we
believe two things are crucial: 1) generic growth in
both investment and consumption demand; and
2) remove obstacles so that supply-side conditions
can fully meet the rise in demand.
Deregulation to revitalise private
investment
Investment should remain the important growth
driver for the foreseeable future. With huge
urbanisation-led investment demand, the
challenge is how to ensure sustainable and
efficient investment growth. Looking at the recent
rebound in investment growth, it is mainly driven
by government-backed infrastructure investment.
However, this comes with a long list of related
problems, such as inefficiency, corruption, limited
sources of funding and the risk of rising local
government debt. We believe the answer lies in
encouraging private investment.
Private investment represents over 60% of
China’s total investment. However, over the past
two year, it has decelerated at a faster pace than
overall fixed asset investment (chart 3). Total FAI
growth slowed by around 5ppts between 2011 and
2013, but private investment growth dropped by
more than 12ppts. This reflects the difficulties
facing private investors, from market access
restrictions to lengthy approval process and
financing constraints.
Chart 3. Private investment growth decelerated faster than
total FAI
(%yr, ytd)
35
30
25
20
15
2011
2012
Total FAI
2013
Private FAI
Source: CEIC, HSBC
As we have argued before (see China: Faster
reform, slower growth, June 2013), private
enterprises are far more efficient than SOEs.
Measured by profitability, private companies have
much higher returns, both on assets and equity
(chart 4). They are also the most important
provider of jobs, employing 80% of the workforce,
up from 50% in the 1990s (chart 5).
Chart 4. Private enterprise is more efficient than SOEs
(return on assets)
16
14
12
10
8
6
4
2
0
(%)
1996 1998 2000 2002 2004 2006 2008 2010 2012
SOE
Private
Source: CEIC, HSBC
5
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26 September 2013
Chart 5. Non-SOEs employ the majority of the workforce
100%
80%
60%
40%
20%
0%
1980 1984 1988 1992 1996 2000 2004 2008 2012
SOEs' share in employment
total investment in primary and secondary
industries but only around 50% in tertiary
industries (chart 6). That is well below its
63.5% share of total fixed asset investment.
Within tertiary industries, private investment
represented between 20% and 30% in the
transport, utility, education and healthcare sectors
this year. However, private investment in the
financial services and IT sectors is zero. This is
not because of a lack of demand.
Source: CEIC, HSBC
We believe the best way to revitalise private
investment is through deregulation and reforms.
Although the process has already started, it has
yet to bear much material. Over the past two years,
industrial measures have been announced,
following the so-called “36 guidelines” to
encourage private investment (“国 36 条”).
However, the reality is that they have had little
effect. More concrete steps are needed to unlock
the potential of private investment.
Market entry
Private companies face many entry barriers.
While SOEs are allowed to invest in 72 out of
80 industries, private companies can only enter
42 (less than foreign companies, which can invest
in 62). Private investment represents over 75% of
The “36 guidelines” make it clear that government
investment should focus on areas concerned with
national security and those where markets are
experiencing failure. Private enterprise is
encouraged to enter infrastructure projects,
municipal projects and other public services
suitable for market-based operations.
More than half of content contained in the
“36 guidelines” concentrates on encouraging private
investment to enter various sectors. These sectors
include energy, telecom, infrastructure, municipal
public services, public housing, medical care,
education, social welfare, culture, tourism, sporting,
financial services, logistics, and defence technology.
Chart 6. Lower private investment in tertiary sectors
90
(%)
private investment as % of FAI
80
70
60
50
40
30
20
10
0
Primary
Source: CEIC, HSBC
6
Secondary
Mining Manufacturing Tertiary
Transport
Utility
Education Healthcare
Culture Public admin
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26 September 2013
However, a report by the All-China Federation of
Industry & Commerce said that market barriers
remained in place and some of the guidelines for
entry were not practical or set very high
thresholds. Premier Li Keqiang recently called for
greater efforts to remove these barriers and urged
government officials to ensure that practical
market access rules were put in place. He also
wants working examples that show how this can
work “as soon as possible” in areas such as
finance, oil, electricity, railways, telecoms,
resource development and public utilities
(source: China Daily 7 September 2013).
Opening the financial services sector to private
companies should also ease the financing
difficulties for small companies. Privately-owned
banks are normally small banks, whose main
customers are small companies. The entry of
privately-owned banks should also create more
competition, increasing efficiency.
Unleashing the power of private
consumption
The expansion of private consumption is high on
the policy agenda. This can be achieved in a
number of different ways.
We expect more practical guidelines and proper
implementation to lead to an increase in private
investment. China’s top 500 private enterprises
operate in sectors which represent the best
opportunities for change. According to the
All-China Federation of Industry and Commerce,
commerce and logistics, resources and energy and
financial services are the three favourite areas
where China’s top private companies would like
to invest.
Income growth
The good news is that the new policy makers are
making efforts to streamline the government and
shorten the administrative approval process.
Income distribution
Financing
We have long argued that the government should
speed up financial market reforms, especially the
development of the bond market, to allow
municipal bonds to be issued to finance local
government infrastructure projects. This should
provide long-term sustainable financing to public
infrastructure investment that is being led by
urbanisation. The development of the bond market
should also force banks to shift their loan focus
from large to small enterprises, as big companies
can easily obtain bond financing at a longer
maturity and lower costs than bank loans.
One of the top priorities is rapid income growth.
This is a challenge when the slowdown in growth
has weighed on employment and incomes. But as
growth should rebound to above 7.5% y-o-y in the
coming quarters, it should translate into
improving labour market conditions and faster
income growth. The support for SMEs is vital for
stabilising employment growth, given that SMEs
provides 80% of employment.
Improving income redistribution to reduce income
inequality is also important. According to the
National Bureau of Statistics, China’s income
inequality – measured by the Gini coefficient –
was officially a high 0.47 in 2012 after peaking at
0.49 in 2008. According to a survey by a think
tank, the China Society of Economic Reform
(CSER), the true picture is probably much worse
once “grey income” is factored in. This inequality
has a negative impact on consumption, not least
because of the strong incentive for the poor to
save because they lack sufficient social security.
Income redistribution can be achieved through
fiscal and tax reforms. This would help expand
the emerging middle classes, which has topped
3m and is still rising.
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26 September 2013
Consumer demand
Supply-side reforms are also needed to unleash
pent-up consumer demand, especially for services.
These areas include:
 Information consumption: This is one of the
hotspots on Beijing’s agenda for stimulating
consumption (see China: Accelerating energy
saving and IT infrastructure investment to
support growth and restructuring, 15 July
2013). At the end of June 2013, China had
the world’s largest netizen population –
591m – or nearly half the country’s
population. Of these, 78.5% (464m) use
mobile phones to access the internet, a 9ppt
increase from the end of 2011.
China’s e-commerce market was worth more
than RMB8trn last year, with online shopping
accounting for RMB1.3trn. The obstacle to
further growth is underdeveloped
infrastructure, such as the lack of equipment
and internet connections (source: China
Internet Network Information Centre). With
China’s spending on information and
communication technology per capita trailing
developed countries like the US and Japan,
the State Council has called for efforts to
upgrade the IT infrastructure network. Beijing
policy makers expect +20% annual growth in
information consumption, which would give
the market a value of RMB3.2trn by 2015.
 Elderly and healthcare. China is aging fast,
with 194m citizens older than 60 in 2012, or
14.3% of the population. This number is likely
to rise to 379m in 2030, or around 26% of the
population, according to UN projections.
China also has the biggest number of disabled
people and “advanced elderly” who need
special care in the world. The one-child policy
only exacerbates matters; couples who are the
only children have to support four parents and
even more grandparents (Chinese traditionally
8
rely on children for elderly care). Elderly care
services are still at the early stage of
development and medical resources are
limited. Beijing has stressed the need to speed
up the development of old-age services, which
could encourage consumer demand.
 Recreation and culture services: China is a
net importer of services (e.g. Hollywood films
are big hits at the country’s booming
cinemas) and China’s tourists are the world’s
top spenders overseas (according to United
Nation’s World Tourism Organisation). This
reflects the supply-side constraints and
underdevelopment of China’s recreation and
culture services sectors. Demand is only
going to grow as income increases (chart 7).
We expect reforms to encourage more private
capital to enter areas still highly regulated or
dominated by state-owned companies (the
film import and censorship for example,
though the country’s top media regulator
eased the rules in July). This should boost
growth in culture-related industries, which
increased 16.5% y-o-y and contributed
5.5% of the GDP in 2012.
Chart 7. More recreational spending as people get richer
Recreation as % of consumption
16%
14%
12%
10%
8%
6%
4%
2%
0%
China
0
20,000
40,000
60,000
80,000
Per capita GDP, USD
Source: United Nations, Chinese Statics Yearbook, Ministry of Culture, HSBC
 Urbanisation: Urbanisation should continue
to drive consumption. As migrant workers
move into higher-productivity jobs, they are
likely to spend more on housing, eating and
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China Economics
26 September 2013
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services as they settle permanently in cities.
We expect 260m rural migrant workers to be
transformed into “urban man”, with an
incremental 360m migrant workers moving to
cities during 2013-30 (see China Inside Out:
Hey, 260m new spenders, July 2013). The key
to making urbanisation a success is reforming
the hukou household registration to give
migrant workers the same rights as urban
residents and changing the system of rural
land tenure that limits migrant workers’
rights. This will be expensive. To provide
public housing and education for the expected
260m migrant workers in the cities, it would
cost local and central governments around
RMB6.24trn, equivalent to 53% of China’s
national fiscal revenue in 2012. This would
require a more balanced distribution of the
fiscal burden between the central government
and local government.
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Charts
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26 September 2013
GDP
 China’s economy is bottoming out from 7.5% y-o-y in 2Q13 as the
recent positive data flows suggest improving demand conditions
 3Q GDP growth is likely to top 7.8% y-o-y as indicated by the
continuous rebound of HSBC China flash manufacturing PMI
 We expect a more sustained growth recovery in the coming
quarters thanks to further filtering-through of fine-tuning policy and
reform measures
1. Long-term real GDP trend
2. OECD leading index versus China real GDP
18
12
15
8
12
4
9
0
6
-4
3
-8
0
-12
02 03 04 05 06 07 08 09 10 11 12 13
%YoY
%y oy
%y oy
14
13
12
11
10
9
8
7
6
00 01 02 03 04 05 06 07 08 09 10 11 12 13
OECD leading (LHS)
Real GDP (RHS)
SAAR
Source: CEIC, HSBC
Source: CEIC, HSBC
3. Service and manufacturing PMI
4. Economic leading indicator versus business climate change
% y oy
12
60
9
20
55
6
10
50
3
0
45
0
-10
40
-3
-20
35
-6
08
09
10
PMI - serv ice
Source: CEIC, HSBC
12
% y oy
65
11
12
13
PMI - mfg
30
-30
00 01 02 03 04 05 06 07 08 09 10 11 12 13
Economic leading indicator (LHS)
Business climate index (RHS)
Source: CEIC, HSBC
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26 September 2013
5. GDP, by region (nominal GDP, weighted)
6. GDP, by industry
YTD, %y oy
17
21
15
18
13
15
11
12
YTD, %y oy
9
9
6
7
3
5
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
0
Bohai
YRD
93
PRD
95
97
99
Primary
Source: CEIC, HSBC
Source: CEIC, HSBC
7. Industrial production
8. Commodity production
% y oy , 3mma
21
40
18
01
03
05
Secondary
07
09
11
13
Tertiary
% y oy , 3mma
30
15
20
12
10
9
6
0
3
-10
01 02 03 04 05 06 07 08 09 10 11 12 13
01 02 03 04 05 06 07 08 09 10 11 12 13
Coal production
Electricity production
VAI
Source: CEIC, HSBC
Source: CEIC, HSBC
9. Construction sector
10. Confidence indices
RMB bn
3,000
%y oy
2,500
30
25
2,000
65
110
105
60
100
20
1,500
1,000
500
0
07
08
09
10
11
Construction output v alue
Source: CEIC, HSBC
12
13
%y oy
95
15
90
10
85
55
50
02 03 04 05 06 07 08 09 10 11 12 13
Consumer confidence (LHS)
Future income confidence (RHS)
Source: CEIC, HSBC
13
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Industrial production
 Industrial production growth exceeded expectations by a wide
margin, up to a 17-month high of 10.4% y-o-y in August
 A faster growth of electricity and heat power supply, transportation
equipment, electric machinery equipment production plus the
lower base effect, led to the upside surprise
 The improvement both in official and HSBC PMIs suggests
that industrial output growth could find a firmer footing in the
coming months
1. Industrial production vs GDP
21
19
17
15
13
11
9
7
5
2. Industrial production growth trend
%y oy
%y oy
16
20
%y oy , 3mma
%mom, 3mma
3
14
12
10
2
15
1
0
10
8
6
-1
5
IP(LHS)
-2
00 01 02 03 04 05 06 07 08 09 10 11 12 13
01 02 03 04 05 06 07 08 09 10 11 12 13
%YoY
GDP (RHS)
SA, %MoM
Source: CEIC, HSBC
Source: CEIC, HSBC
3. Industrial production vs manufacturing PMI
4. Electricity production changes together with IP
%y oy , 3mma
21
19
17
15
13
11
9
7
5
%
65
60
55
50
25
% y oy , 3mma
% y oy , 3mma 40
30
20
20
15
10
45
40
35
05
06
07
08
IP (LHS)
Source: CEIC, HSBC
14
4
09
10
11
12
13
Mfg PMI (RHS)
0
10
-10
-20
5
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
IP
Source: CEIC, HSBC
Electricity production
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5. GDP, by region (nominal GDP, weighted)
6. GDP, by industry
% y oy , 3mma
24
% y oy , 3mma
25
20
19
15
14
10
5
9
0
4
01 02 03 04 05 06 07 08 09 10 11 12 13
01 02 03 04 05 06 07 08 09 10 11 12 13
Light industry
Heav y industry
SOE
Share holding enterprise
Source: CEIC, HSBC
Source: CEIC, HSBC
7. Manufacturing PMI breakdown
8. Industrial profit margin
70
10
60
8
50
6
Collectiv e ow nership
Foreign funded
%
4
40
2
30
05
06
07
08
PMI Index
09
10
11
Output
12
13
0
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Industrial enterprise: pre-tax profit margin
New Orders
Source: CEIC, HSBC
Source: CEIC, HSBC
9. Mining, petroleum and natural gas extraction
10. Manufacturing production
% y oy
30
25
20
15
10
5
0
-5
-10
% y oy
40
30
20
Coal mining & dressing
Petroleum & natural gas ex traction
Source: CEIC, HSBC
Food
Electric M&E
Jul-13
Jul-12
Jan-13
Jul-11
Jan-12
Jul-10
Jan-11
Jul-09
Jan-10
Jan-09
Jul-08
Jul-07
Jan-08
0
Jan-07
Jul-13
Jan-13
Jul-12
Jul-11
Jan-12
Jul-10
Jan-11
Jul-09
Jan-10
Jul-08
Jan-09
Jul-07
Jan-08
Jan-07
10
Tex tile
Transport'n equip
Source: CEIC, HSBC
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Private consumption
 Retail sales growth edged up to 13.4% y-o-y in August from
13.2% y-o-y in July, with real growth rebounding to 11.6% y-o-y
 Consumption for apparel, home appliances, furniture and
cosmetics accelerated, while sales in automobile and jewellery
slowed down
 Consumer spending remains resilient and ongoing growth
recovery is likely to support robust growth in the coming months
1. Retail sales trend
2. Consumer confidence
60
25
50
20
40
30
15
120
%
110
100
20
10
10
0
5
-10
90
80
00 01 02 03 04 05 06 07 08 09 10 11 12 13
Consumer confidence
Satisfactory index
Ex pectation index
00 01 02 03 04 05 06 07 08 09 10 11 12 13
%YoY (LHS)
SAAR, 3mma (RHS)
Source: CEIC, HSBC
Source: CEIC, HSBC
3. Confidence in income
4. Confidence in prices
65
90
60
70
55
50
50
30
45
10
01 02 03 04 05 06 07 08 09 10 11 12 13
%
01 02 03 04 05 06 07 08 09 10 11 12 13
Current price satisfaction
Future price ex pectation
Current income sentiment
Future income confidence
Source: CEIC, HSBC
16
Source: CEIC, HSBC
abc
Macro
China Economics
26 September 2013
5. Retail sales, by sector
6. Retail sales in urban vs rural areas
% y oy
27
24
% y oy
27
24
21
18
21
15
12
18
9
6
12
15
9
06
07
08
09
10
11
12
13
06
07
08
Wholesale & Retail Trade
Accommodation & Catering Trade
09
10
11
12
Urban
13
Rural
Source: CEIC, HSBC
Source: CEIC, HSBC
7. Per-capita income vs expenditure – Urban households
8. Per-capita income vs expenditure – Rural households
per capita, % y oy
25
30
per capita, % y oy
25
20
20
15
15
10
10
5
5
0
0
03
04
05
06 07 08 09 10 11
Income
Disposable income
Consumption ex penditure
12
13
-5
02 03 04
05 06 07 08 09 10 11 12 13
Cash Income
Cash consumption ex penditure
Source: CEIC, HSBC
Source: CEIC, HSBC
9. Expenditure, by product – Urban households
10. Expenditure, by product – Rural households
%y oy
30
25
%y oy
40
30
20
15
20
10
5
10
0
0
-5
-10
03
04
05
06
07
Food & housing
Transport & telecom
Source: CEIC, HSBC
08
09
10
11
12
13
Clothing
Serv ice & others
03
04
05
06
07
Food & housing
Transport & telecom
08
09
10
11
12
13
Clothing
Serv ice & others
Source: CEIC, HSBC
17
abc
Macro
China Economics
26 September 2013
Fixed investment
 Fixed asset investment (FAI) growth accelerated to 20.3% y-o-y in
the first eight months, and August FAI growth rebounded to 21.4%
y-o-y from 20.2% y-o-y in July
 Infrastructure investment expanded 29.3% y-o-y in August, which
was the main driver behind the FAI acceleration
 The pick-up in local level investments has fully offset the
slowdown in central government-backed investment
1. FAI growth
2. FAI, by enterprise ownership
38
y td, %y oy
70
60
50
40
30
20
10
0
-10
33
28
23
18
05
06
07
08
09
10
y td, %y oy
11
12
05
13
06 07
08
09
SOE
Priv ate enterprise
10
11
12 13
Shareholding
Foreign fund
Source: CEIC, HSBC
Source: CEIC, HSBC
3. Construction vs equipment purchase
4. Number of projects started and under construction
y td, %y oy
40
35
40
30
20
25
0
20
-20
05
06
Source: CEIC, HSBC
18
y td, %y oy
60
07
08
09
10
11
12
Construction and installation
Equipment purchase
13
05
06
07
08
Under construction
Source: CEIC, HSBC
09
10
11
12
13
New ly Started
abc
Macro
China Economics
26 September 2013
5. FAI, by work type
6. FAI in mining sector
y td, %y oy
70
y td, %y oy
150
60
50
100
40
30
50
20
10
0
0
05
06
07
08
09
New Construction
Transformation
10
05
11
12
13
Ex pansion
06
07
08
09
10
Coal
Non metal
11
Source: CEIC, HSBC
7. FAI in manufacturing sectors
8. FAI in construction, real estate and transport
y td, %y oy
y td, % y oy
100
80
80
60
60
40
40
13
Ferrous metal
Electricity & heating
Source: CEIC, HSBC
100
12
20
20
0
0
-20
-20
-40
05
06
07
08
09
10
Chemical
Tex tile
11
12
13
Non metal mineral
Electric M&E
05
06
07
Real estate
08
09
Source: CEIC, HSBC
9. FAI, by infrastructure project
10. FAI, by source of financing
80%
80%
60%
60%
40%
40%
20%
20%
0%
0%
04
05
06 07
Railw ay
Urban public transit
Air
Source: CEIC, HSBC
08
09
10
11 12
Highw ay
Waterw ay
13
12
13
Transport
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
100%
11
Construction
Source: CEIC, HSBC
100%
10
State budget
Foreign capital
Domestic loan
Self raised
Source: CEIC, HSBC
19
abc
Macro
China Economics
26 September 2013
Trade
 China's export growth rebounded to 7.1%y-o-y in August, from
July's 5.1% y-o-y and 2Q’s 3.7% y-o-y, reflecting the gradual
improvement of external demand conditions
 Import growth expanded by 7% y-o-y in August, compared with
July’s 10.8% y-o-y and 2Q’s 5% y-o-y, signalling a modest
rebound in China's domestic demand conditions
 New export orders bounced back into expansion territory in
September’s HSBC flash PMI, a sign of additional improvement of
external demand
-20
-40
-40
00 01 02 03 04 05 06 07 08 09 10 11 12 13
Trade balance (RHS)
Ex port (LHS)
Import (LHS)
Ex port (SA)
Source: CEIC, HSBC
Source: CEIC, HSBC
3. Exports to G3 and ROW
4. Imports from G3 and ROW
%y oy , 3mma
50
40
30
20
10
0
-10
-20
-30
96
98
00
100
80
60
40
20
0
-20
-40
-60
02
Ex port to G3
Source: CEIC, HSBC
20
04
06
08
10
12
Ex port to ROW
Jul-13
0
-20
Jan-13
0
20
Jul-12
20
40
%mom, 3mma
25
20
15
10
5
0
-5
-10
-15
Jan-12
60
40
Jul-11
USD bn
Jan-11
%y oy , 3mma
Jul-10
80
2. Sequential growth in exports and imports
Jan-10
1. Overall external trade trend
Imports (SA)
% y oy , 3mma
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Import from G3
Source: CEIC, HSBC
Import from ROW
abc
Macro
China Economics
26 September 2013
5. Taiwan’s new export orders as a leading indicator
60
6. PMI new export orders vs exports
% y oy , 3mma
20
%mom, 3mma
Pts
60
15
40
55
10
20
5
0
0
50
-5
-20
45
-10
-40
-15
00 01 02 03 04 05 06 07 08 09 10 11 12 13
Ex port
Taiw an's new ex port orders
40
10
11
Ex port (SA, LHS)
Source: CEIC, HSBC
Source: CEIC, HSBC
7. Exports – ordinary vs processing trade
8. Trade price index
% y oy
100
12
13
PMI new ex port orders (RHS)
% y oy
90
80
60
40
40
20
-10
0
-20
-60
-40
06
06
07
08
09
10
Ex port - Ordinary trade
07
08
11
12
13
Ex port - Processing
09
Source: CEIC, HSBC
Source: CEIC, HSBC
9. Exports, by major commodity
10. Imports, by major commodity
% y oy
120
90
10
11
12
13
12
13
Ex port trade index v alue
Import trade index v alue
% y oy , 3mma
80
60
30
0
60
-30
-60
20
40
0
06
07
Source: CEIC, HSBC
08
09
10
11
12
Mineral fuel, lubricants & material
Manufactured goods
Machiery & transport equipment
Misc. mfg articles
13
-20
06
07
08
Iron ore
09
10
11
Crude petroleum oil
Source: CEIC, HSBC
21
abc
Macro
China Economics
26 September 2013
Prices
 Headline CPI edged down from 2.7% y-o-y in July to 2.6% in
August, in line with market and HSBC expectations
 Food price growth slowed down to 4.7% y-o-y as the deceleration
in prices of grain and fresh vegetables offset the rise in meat and
poultry prices; non-food price inflation edged down to 1.5% y-o-y
 Inflationary pressures remain modest thanks to the still below-
potential growth and limited upstream price pressures
1. Consumer price trend
10
%y oy
2. CPI, by major segment
%mom, 3mma
2.0
25
1.5
20
1.0
15
0.5
10
0.0
5
-2
-0.5
0
-4
-1.0
-5
8
6
4
2
0
%y oy
06
01 02 03 04 05 06 07 08 09 10 11 12 13
YOY (LHS)
MOM (RHS)
07
08
Ov erall
Source: CEIC, HSBC
Source: CEIC, HSBC
3. Urban vs rural inflation
4. Producer price index
10
%y oy
15
8
10
Core
11
12
13
Food
%mom, 3mma
10
6
1.5
0.5
5
4
-0.5
2
0
0
-1.5
-5
-2
-4
-10
01 02 03 04 05 06 07 08 09 10 11 12 13
Urban
Source: CEIC, HSBC
22
%y oy
09
Rural
-2.5
03 04 05 06 07 08 09 10 11 12 13
YOY (LHS)
MOM (RHS)
Source: CEIC, HSBC
abc
Macro
China Economics
26 September 2013
5. PPI, by industry (1)
15
6. PPI, by industry (2)
%y oy
%y oy
15
10
10
5
5
0
0
-5
-10
-5
-15
-10
01 02 03 04 05 06 07 08 09 10 11 12 13
Producer goods
Consumer goods
01 02 03 04 05 06 07 08 09 10 11 12 13
Light industry
Heav y industry
Source: CEIC, HSBC
Source: CEIC, HSBC
7. Purchase and output prices
8. Fixed asset investment price index
% y oy
20
15
10
5
0
-5
-10
-15
20
% y oy
15
10
5
0
-5
-10
01 02 03 04 05 06 07 08 09 10 11 12 13
05
PPI
Corporate goods price index
Purchasing price index - raw materials
06
07
Source: CEIC, HSBC
Source: CEIC, HSBC
9. Petroleum prices
10. Property prices
% y oy
180
150
120
90
60
30
0
-30
-60
08
Ov erall index
Construct'n & install'n
35
09
10
11
12
13
Equip, tool & instrum't
% y oy
25
15
5
-5
05
06
Source: CEIC, HSBC
07
08
09 10
11 12
PPI - petroleum and natural gas
Import v alue index - petroleum
13
-15
01 02 03 04 05 06 07 08 09 10 11 12 13
Residential property price
Source: CEIC, HSBC
23
abc
Macro
China Economics
26 September 2013
Commodity prices
 The PPI contraction narrowed to -1.6% y-o-y in August, compared
to -2.3% y-o-y in July. On a sequential basis, PPI recorded its first
positive sequential expansion (0.1% m-o-m) since March
 Input prices of fuel, ferrous metals, non-ferrous metals and
construction materials all witnessed smaller contractions
 We believe that PPI is bottoming out with the improvement in
overall demand conditions
1. Wholesale price: Whorl steel
2. Wholesale price: Electrolysed copper
6,000
80,000
RMB / Ton
RMB / Ton
70,000
5,500
60,000
5,000
50,000
4,500
40,000
4,000
30,000
3,500
20,000
3,000
10,000
04
05
06
07
08
09
10
11
12
01 02 03 04 05 06 07 08 09 10 11 12 13
13
Source: CEIC, HSBC
Source: CEIC, HSBC
3. Wholesale price: Aluminium
4. Wholesale price: Lead
23,000
26,000
RMB / Ton
21,000
22,000
19,000
18,000
17,000
15,000
14,000
13,000
11,000
10,000
01 02 03 04 05 06 07 08 09 10 11 12 13
Source: CEIC, HSBC
24
RMB / Ton
06
Source: CEIC, HSBC
07
08
09
10
11
12
13
abc
Macro
China Economics
26 September 2013
5. Wholesale price: Zinc
36,000
RMB / Ton
6. Wholesale price: Nickel
450,000
32,000
400,000
28,000
350,000
RMB / Ton
300,000
24,000
250,000
20,000
200,000
16,000
150,000
12,000
100,000
8,000
50,000
01 02 03 04 05 06 07 08 09 10 11 12 13
01 02 03 04 05 06 07 08 09 10 11 12 13
Source: CEIC, HSBC
Source: CEIC, HSBC
7. Wholesale price: Diesel oil
8. Wholesale price: Gasoline
10,000
RMB / Ton
11,000 RMB / Ton
9,000
10,000
8,000
9,000
7,000
8,000
6,000
7,000
5,000
6,000
4,000
5,000
3,000
4,000
2,000
3,000
01 02 03 04 05 06 07 08 09 10 11 12 13
01 02 03 04 05 06 07 08 09 10 11 12 13
Source: CEIC, HSBC
Source: CEIC, HSBC
9. Retail price: Rice
10. Retail price: Flour
6.0
4.75
4.50
4.25
4.00
3.75
3.50
3.25
3.00
2.75
2.50
2.25
2.00
1.75
RMB / Kg
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
01 02 03 04 05 06 07 08 09 10 11 12 13
Source: CEIC, HSBC
RMB / Kg
01 02 03 04 05 06 07 08 09 10 11 12 13
Source: CEIC, HSBC
25
abc
Macro
China Economics
26 September 2013
Money and credit growth
 August new lending recorded a slight pick-up to RMB 711.3bn from
RMB699.9bn in July. The medium and long-term corporate loans
remained resilient
 September M2 and M1 grew 14.7% y-o-y and 9.9% y-o-y, respectively
reflecting the temporary improvement in liquidity conditions
 Total social financing shot up to RMB 1,570bn due to unexpected
increase in entrusted loans and bankers’ acceptance bills
40
35
30
25
20
15
10
5
0
-5
Deposit
Loan
Household deposit
Source: CEIC, HSBC
Source: CEIC, HSBC
3. FAI vs loan growth
4. New renminbi loans
15
5
04
05
06
07
Loan
Source: CEIC, HSBC
26
08
09
10
11
12
Medium & long term
Short term and bill financing
New loan
13
FAI
Source: CEIC, HSBC
Jul-13
Jan-08
25
Jul-12
35
New RMB loan
Jul-09
45
RMB bn
Jan-09
2100
1800
1500
1200
900
600
300
0
-300
Jul-08
%y oy
55
Loan
Jan-13
M2
Jul-11
M1
01 02 03 04 05 06 07 08 09 10 11 12 13
Jan-12
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
%y oy
Jul-10
%y oy
Jan-11
40
35
30
25
20
15
10
5
0
2. Deposits vs loan growth
Jan-10
1. Loans vs money supply
abc
Macro
China Economics
26 September 2013
5. PBoC open market operations
6. Consumer credit
RMB bn
2,500
2,000
1,500
1,000
500
0
-500
-1,000
-1,500
-2,000
%y oy
70
60
50
40
30
20
Liquidity withdrawal
Consumer loan
Source: Wind, HSBC (Data up to 25 September 2013)
Source: CEIC, HSBC
7. Loan-to-deposit ratio
8. Money supply vs price level
95
%
% y oy
50
90
Loan
% y oy
80
30
75
20
70
6
4
2
10
65
0
0
60
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Loan-to-deposit ratio
-2
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
M1 (LHS)
Source: CEIC, HSBC
Source: CEIC, HSBC
9. M1-M2 gap vs CPI
10. Foreign reserves
% y oy
% y oy
10
10
8
5
6
0
4
-5
2
-10
0
-15
-2
01 02 03 04 05 06 07 08 09 10 11 12 13
M1-M2 gap (LHS)
CPI (RHS)
Source: CEIC, HSBC
10
8
40
85
15
Jan-13
13
Jan-12
Liquidity injection
Net position
12
Jan-11
11
Jan-10
10
Jan-09
09
Jan-08
10
CPI (Lag by 6 months, RHS)
4,000
50
3,000
40
30
2,000
20
1,000
10
0
0
00 01 02 03 04 05 06 07 08 09 10 11 12 13
USD bn (LHS)
%YoY (RHS)
Source: CEIC, HSBC
27
abc
Macro
China Economics
26 September 2013
Interest and exchange rates
 The PBoC removed the floor on lending rates (at 70% of the
benchmark rate) on 20 July; this should help lower borrowing costs
over time, yet the immediate impact is likely to be marginal
 Widening the floating range of deposit rates could be the next
move, but this requires the introduction of deposit insurance first
 HSBC FX strategists have lowered their USD-CNY forecasts for
2013 and 2014 to 6.12 and 6.10 respectively, given the recent
uptick in China economic data and a delay in Fed QE tapering
1. Lending vs savings rates
8
7
6
5
2. Required reserve ratio
% p.a.
%
27
22
17
4
3
2
1
0
12
7
06
07
00 01 02 03 04 05 06 07 08 09 10 11 12 13
1Y lending rate
1Y deposit rate
08
09
10
11
12
13
RRR
Large depository institution
Small and medium depository institution
Source: CEIC, HSBC
Source: CEIC, HSBC
3. PBoC bill issuance and reference yield
4. Interbank rate
RMB bn
1,000
% p.a.
800
3
600
2
400
1
200
0
0
05
06
07
08
09
10
11
12
PBoC total bill issuance (LHS)
3M PBoC bill issuance ref. y ld (RHS)
Source: CEIC, HSBC
28
4
13
% p.a.
8
7
6
5
4
3
2
1
0
06
07
08
09
3M SHIBOR
Source: CEIC, HSBC
10
11
12
13
3M CHIBOR
abc
Macro
China Economics
26 September 2013
5. Bond yields
6. Mortgage rate
% p.a.
5
% p.a.
5.5
4
5.0
3
4.5
2
4.0
1
3.5
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
0
3.0
02 03 04 05 06 07 08 09 10 11 12 13
5 Yr or Less
Ov er 5 Yr
1Y treasury bond y ield
1Y Policy financial bond y ield
Source: CEIC, HSBC
Source: CEIC, HSBC
7. Distribution of actual lending rate
8. Foreign exchange rate
%
100
12
RMB
11
80
As Benchmark
10-30% abov e
Jul-13
Jan-13
Jul-12
Jul-11
10% below
30-100% abov e
Jan-12
Jan-11
7
Jul-10
8
0
Jan-10
20
Jul-09
9
Jan-09
40
Jul-08
10
Jan-08
60
6
03
10% abov e
04
05
06
07
RMB/USD
Source: CEIC, HSBC
Source: CEIC, HSBC
9. RMB spot vs forward rate
10. Effective exchange rate
6.95
RMB/USD
6.75
6.55
6.35
Spot
Source: CEIC, HSBC
Jan-13
May-13
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-10
May-10
Sep-10
Jan-11
Jan-09
May-09
Sep-09
6.15
25
20
15
10
5
0
-5
-10
-15
08
09
10
RMB/JPY100
11
12
13
RMB/EUR
%y oy
96
98
12M NDF
00
02
REER
04
06
08
10 12
NEER
Source: CEIC, HSBC
29
abc
Macro
China Economics
26 September 2013
Employment and income
 China created 7.25m new jobs in 1H13 (vs. a target of 9m for
2013); the official urban registered unemployment rate remained
unchanged at 4.1% in 1H13
 Household income growth remained steady in 1H13; the income
of rural households rose 9.2% y-o-y in real terms compared with
6.5% y-o-y for urban households
 Labour market is gradually on the mend, as employment sub-
indices of HSBC PMIs improved over the past few months
2. Creation of jobs
%y r
14
%
4.4
4.3
12
4.2
10
4.1
8
4.0
6
3.9
05
06
07
GDP (LHS)
08
09
10
11
12
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
'000 person (YTD)
%
11
9
7
5
13
Urban new jobs (LHS)
Urban unemploy ment rate (RHS)
GDP (RHS)
Source: CEIC, HSBC
Source: CEIC, HSBC
3. Employment, by major industry
4. Real household income per capita
800
mil person
18
600
13
Sep-08
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
1. Economic growth vs unemployment
YTD, %y oy
13
400
8
200
3
0
2003
Primary
Source: CEIC, HSBC
30
2005
2007
2009
Secondary
2011
2013
06
07
Tertiary
08
Urban
Source: CEIC, HSBC
09
10
11
12
Rural
13
abc
Macro
China Economics
26 September 2013
5. Economic growth vs real wage growth
6. Average wage growth
%y oy
20
YTD, %y oy
20
15
16
10
12
5
8
02 03 04 05 06 07 08 09 10 11 12 13
02 03 04 05 06 07 08 09 10 11 12 13
Real av erage w age grow th (YTD)
GDP
Nominal
Source: CEIC, HSBC
Source: CEIC, HSBC
7. Wage growth, by enterprise
8. Wage growth, by region
YTD, %y oy
YTD, %y oy
25
20
20
15
15
10
10
SOE
Collectiv e ow ned units
Eastern
Others
Central
Source: CEIC, HSBC
Source: CEIC, HSBC
9. Household income distribution – Urban
10. Household income distribution – Rural
100%
100%
80%
80%
60%
60%
40%
40%
20%
20%
0%
0%
2006
<RMB25k
Source: CEIC, HSBC
2007
2008
RMB25-55K
2009
RMB55-85K
2010
2011
>RMB85K
2006
<RMB1K
2007
RMB1-2.5K
2008
Sep-09
Dec-08
Mar-08
13
Jun-07
12
Sep-06
11
Dec-05
10
Mar-05
09
Jun-04
08
Sep-03
07
Mar-02
5
5
Dec-02
25
Real
Central
2009
RMB2.5-5K
2010
RMB>5K
Source: CEIC, HSBC
31
abc
Macro
China Economics
26 September 2013
Asset markets
 Property prices maintained its uptrend in y-o-y terms, while
transactions slowed in August
 The approval of refinancing plans of real estate firms may
facilitate the development of the property market, despite many
existing curbs
 HSBC's equity strategy team lowered its year-end 2013 index
target for SHCOMP to 2,100 from 2,300 on 5 July, as slower
growth could continue to add downside risks to earnings
1. Stock indices
2. Stock index vs money supply
6,000
250
5,000
200
4,000
150
%y oy
%y oy
100
3,000
50
2,000
0
1,000
-50
0
-100
949596 97989900 01020304 0506070809 10111213
Shanghai (SSE)
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
SSE index (LHS)
M1 (RHS)
Shenzhen (SZSE)
Source: CEIC, HSBC
Source: CEIC, HSBC
3. Price-to-earnings ratio
4. Market capitalisation, by stock exchange
80
%
50,000
70
RMB bn
40,000
60
50
30,000
40
20,000
30
10,000
20
-
10
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
SSE
Source: CEIC, HSBC
32
40
35
30
25
20
15
10
5
0
06
SZSE
07
08
SSE
Source: CEIC, HSBC
09
10
11
12
SZSE
13
abc
Macro
China Economics
26 September 2013
5. Capital raised, by stock exchange
6. Real estate index
RMB bn
160
2000=100
108
106
120
104
102
80
100
40
98
0
96
07
08
09
10
11
12
94
13
04
SSE
05
06
SZSE
07 08 09 10 11
Real estate climate index
Source: CEIC, HSBC
Source: CEIC, HSBC
7. Property prices
8. Property sales vs money supply
% y oy
% y oy
140
120
100
80
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
14
12
10
8
6
4
2
0
-2
-4
% y oy
30
20
10
0
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Property sales (YTD, LHS)
M1 (RHS)
Source: CEIC, HSBC
9. Property prices vs money supply
10. Property investment vs property started
% mom, 3mma
1.5
1.0
0.5
4
80
3
60
2
40
1
20
0
-1
-0.5
-2
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
0.0
Property price index (LHS)
Source: CEIC, HSBC
M1 (SA, RHS)
50
40
Source: CEIC, HSBC
% mom
13
60
40
20
0
-20
Property price index
2.0
12
YTD, % y oy
0
-20
-40
05
06
07
08
09
Property inv estment
10
11
12
13
Floor space started
Source: CEIC, HSBC
33
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Macro
China Economics
26 September 2013
This page has been left blank intentionally.
34
Macro
China Economics
26 September 2013
abc
Data and forecasts
35
abc
Macro
China Economics
26 September 2013
China
Production, demand and employment
GDP growth (% y-o-y)
Nominal GDP (USDbn)
GDP per capita (USD)
Retail sales (% y-o-y)
Fixed Asset Investment (nominal, % y-o-y)
Industrial production (% y-o-y)
Gross domestic saving (% GDP)
Unemployment rate, average (%)
Prices & wages
CPI, average (% y-o-y)
CPI, year-end (% y-o-y)
Core CPI, average (% y-o-y)
Core CPI, year-end (% y-o-y)
PPI, average (% y-o-y)
PPI, year-end (% y-o-y)
Manufacturing wages, nominal (% y-o-y)
Money, FX & interest rates
Central bank money M0, average (% y-o-y)
Broad money supply M2, average (% y-o-y)
Policy rate, year-end (%)
5yr yield, year-end (%)
Real private sector credit growth (% Yr)
RMB /USD, year-end
RMB /USD, average
RMB /EUR, year-end
RMB /EUR, average
External sector
Merchandise exports (USDbn)
Merchandise imports (USDbn)
Trade balance (USDbn)
Current account balance (USDbn)
Current account balance (% GDP)
Net FDI (USDbn)
Net FDI (% GDP)
Current account balance plus FDI (% GDP)
Exports, value (% y-o-y)
Imports, value (% y-o-y)
International FX reserves (USDbn)
Import cover (months)
Public and external solvency indicators
Commercial banks’ FX assets (USDbn)
Gross external debt (USDbn)
Gross external debt (% GDP)
Short term external debt (% of int’l reserves)
Consolidated government balance (% GDP)
Public Sector Debt (% GDP)
Macro-prudential indicators
Capital adequacy ratio
Non-performing loan ratio
Household Debt/ GDP (%)
Total Credit/GDP (%)
Residential House prices (% y-o-y)
Loan/Deposit ratio
Stock market capitalisation/GDP (%)
2008
2009
2010
2011
2012
2013f
2014f
9.6
4,535
3,432
21.6
26.1
12.9
51.4
4.2
9.2
4,990
3,758
15.5
30.5
12.9
51.8
4.3
10.4
5,938
4,428
18.5
24.5
15.7
52.6
4.1
9.3
7,320
5,431
17.1
23.8
13.9
51.5
4.3
7.7
8,283
6,115
14.3
20.6
10.0
51.0
4.1
7.7
9,290
6,825
12.5
20.5
9.6
51
4.3
7.4
10,360
7,573
12.0
19.0
9.4
50.5
4.4
5.9
1.2
0.9
-0.4
6.9
-1.1
15.8
-0.7
1.9
-1.1
0
-5.4
1.7
9
3.3
4.6
0.9
1.7
5.5
5.9
13
5.4
4.1
2.2
1.6
6.1
1.7
13
2.7
2.5
1.5
1.6
-1.7
1.9
13.0
2.6
2.7
1.7
1.5
-1.5
0.1
12.5
2.7
2.4
1.7
1.5
0.7
1.2
12.0
12.4
16.7
5.31
5.76
15
6.82
6.93
9.48
10.08
12.1
26.5
5.31
5.76
13
6.83
6.83
9.77
9.55
14.9
23.7
5.81
6.16
15.5
6.62
6.76
8.81
8.97
16
14.7
6.56
6.85
13.7
6.3
6.46
8.16
9.00
9.5
13.4
6.00
6.40
12.5
6.23
6.27
8.22
8.19
13
13.9
6.00
6.40
14
6.12
6.18
7.59
7.91
13
13.5
6.00
6.40
14
6.10
6.11
7.44
7.52
1,429
1,133.10
295.5
426
9.4
108.3
2.4
11.8
17.2
18.5
1,946
18.9
1,202
1,005.60
196.1
284
5.7
90
1.8
7.5
-15.9
-11.3
2,399
27.9
1,578
1,394
184.5
250
4.2
105.8
1.8
6.0
31.4
38.6
2,850
24.8
1,899
1,741
157.9
201.1
2.7
116
1.6
4.3
20.3
24.9
3,181
23.1
2,049
1,816
233.0
193
2.3
111.7
1.4
3.7
7.9
4.3
3,312
20.6
2233
1965
269
215
2.3
121
1.3
3.6
9.0
8.2
3,650
22.0
2457
2122
335
265
2.6
132
1.3
3.8
10.0
8.0
3,650
21.4
181.3
390.2
8.6
11.6
-0.4
34.5
115.3
428.6
8.6
10.8
-2.2
44.0
128.1
548.9
9.3
13.2
-2.5
43.4
147.5
653.9
9.2
15.0
-2
38.9
167.3
885.0
10.7
19.7
-1.5
38.7
186.7
1025.0
11.0
20.6
-2.1
37.8
207.5
1165.0
11.2
23.3
-1.8
36.7
12
2.4
11.8
96.6
-1.7
65.1
38.6
11.4
1.6
16.2
117.2
23.2
66.9
71.6
12.2
1.1
18.9
120.4
7.4
66.7
66.7
12.7
1.0
18.8
115.8
-0.7
68.0
45.4
13
1.0
20.1
121.3
8.7
69.0
44.4
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Note: Industrial production is the output of all industrial companies with annual sales over RMB20m.
Source: CEIC, IMF, ADB, HSBC estimates
36
Macro
China Economics
26 September 2013
abc
Notes
37
Macro
China Economics
26 September 2013
abc
Disclosure appendix
Analyst Certification
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personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific
recommendation(s) or views contained in this research report: Hongbin Qu and Jun Wei Sun
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This report is dated as at 26 September 2013.
All market data included in this report are dated as at close 25 September 2013, unless otherwise indicated in the report.
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Senior Economist
+55 11 3371 8183
constantin.c.jancso@hsbc.com.br
Priscila Godoy
Economist
+55 11 3847 5190
priscila.h.godoy@hsbc.com.br
Mexico
Sergio Martin
Chief Economist
+52 55 5721 2164
sergio.martinm@hsbc.com.mx
Central America
Lorena Dominguez
Economist
+52 55 5721 2172
lorena.dominguez@hsbc.com.mx