EconoTicker

China’s Composite PMI rose to 51.1 (prev. 50.1), signaling mild economic growth. The Manufacturing PMI edged up to 50.2 (prev. 49.1, exp. 50.0), returning to expansion, while the Non-Manufacturing PMI increased slightly to 50.4 (prev. 50.2, exp. 50.3), reflecting stable services and construction activity.

China's central bank has kept its key loan prime rates unchanged, navigating economic growth challenges and a weakening yuan

The People's Bank of China left the one-year loan prime rate at 3.10% and the five-year rate at 3.60%, both at record lows after past cuts.

This decision comes amid rising U.S.-China trade tensions. With rising tariffs, Beijing faces pressure to stabilize its economy while avoiding further yuan depreciation.

Markets now turn their attention to potential fiscal stimulus. Will Beijing roll out new measures to boost consumer spending and economic growth?

In January 2025, China's financial metrics presented a better landscape. The M2 Money Supply expanded by 7.0% year-over-year, slightly below the anticipated 7.3% and decelerating from December's 7.3% growth. Conversely, new bank loans surged to a record 5.13 trillion yuan, significantly surpassing the projected 770 billion yuan and the previous month's 990 billion yuan. Outstanding loan growth increased by 7.5% year-over-year, marginally above the expected 7.3% but slightly below December's 7.6%. Total Social Financing, a broad measure of credit and liquidity, reached 7.06 trillion yuan, exceeding the forecasted 6.4 trillion yuan and the prior month's 2.86 trillion yuan. This substantial rise in lending is attributed to the central bank's efforts to bolster economic recovery, though underlying demand remains fragile amid ongoing economic uncertainties.

China’s inflation data for January 2025 showed some improvement, with the Consumer Price Index (CPI) rising by 0.7% month-over-month, missing the expected 0.8% increase and rebounding from 0.0% in the previous month. On a yearly basis, CPI grew 0.5%, slightly higher than the 0.4% forecast, signaling a modest recovery in consumer prices. However, factory gate prices remained under pressure, as the Producer Price Index (PPI) declined 2.3% year-over-year, matching the previous month's drop and coming in slightly below expectations of -2.2%. The data suggests a gradual improvement in consumer demand, though deflationary pressures persist in the industrial sector.

China's services sector growth slowed in January 2025, with the Caixin Services PMI dropping to 51.0, below the expected 52.3 and the previous 52.2. While the index remains in expansion territory, the decline suggests a moderation in service sector activity amid evolving economic conditions.

China's Caixin Manufacturing PMI edged down to 50.1 in January, missing expectations of 50.6 and slipping from 50.5 in December. The decline suggests slowing growth in the manufacturing sector, with output and new orders showing signs of weakness amid uncertain global demand.

China's economic activity showed signs of weakening in January 2025, as reflected in the latest PMI figures. The Composite PMI fell to 50.1 from 52.2 in December, while the Manufacturing PMI slipped into contraction territory at 49.1, down from 50.1. The Non-Manufacturing PMI also declined significantly to 50.2 from 52.2, indicating a sharp slowdown in growth. These figures highlight reduced momentum across both manufacturing and services sectors, as China faces a combination of domestic challenges and external pressures.

On January 20, 2025, the People's Bank of China (PBOC) decided to keep the one-year loan prime rate steady at 3.1% and the five-year rate, which guides mortgage rates, unchanged at 3.60%. The move aims to support the weakening yuan, sustain liquidity, and bolster the ongoing economic recovery. However, the decision had a limited impact on market sentiment regarding the yuan, reflecting cautious investor outlooks amid broader economic uncertainties.

China's trade data for December 2024 showcased robust performance, with exports surging by 10.7% YoY, surpassing the forecast of 7.3% and the previous 6.7%, driven by strong global demand during the holiday season. Imports also exceeded expectations, growing by 1.0% YoY compared to the forecasted -1.5% and the previous -3.9%, reflecting improving domestic demand and higher purchases of raw materials and energy. The trade balance widened to $104.84 billion, beating the forecast of $100 billion and the previous $97.44 billion, underscoring China's resilience in global trade dynamics and its ability to capitalize on recovering economic conditions worldwide.

As expected, Chinese industrial production in November grew by 5.4%, while unemployment remained steady at 5.0%. Additionally, the slowest home price decline in 17 months signals housing market stabilization. This upbeat data could reflect the market's reaction to recent stimulus measures from Beijing, prompting Moody's to improve its 2024 GDP forecast for China to 4.2%. However, retail sales fell short of expectations, highlighting ongoing weakness in consumer spending.

China's trade data for November highlights a mixed economic picture, with exports growing 6.7% year-on-year, below the expected 8.5% and significantly slower than the 12.7% increase in October. On the other hand, imports contracted by 3.9%, missing expectations for a modest 0.3% growth and deepening from the previous month’s 2.3% decline. The trade balance widened to $97.44 billion, surpassing forecasts of $94.00 billion. The data underscores persistent weakness in domestic demand, with imports reflecting softer consumption and investment, even as external demand for Chinese goods moderates.

China's inflation data for November 2024 highlights ongoing economic concerns. The Consumer Price Index (CPI) declined by 0.6% month-over-month, exceeding the expected drop of 0.4% and the previous month's decline of 0.3%. On an annual basis, CPI growth slowed to 0.2%, missing the 0.5% forecast and slightly below October's 0.3%, signaling weak domestic demand.

Producer Price Index (PPI) data reflects persistent deflationary pressures in the industrial sector. The PPI contracted by 2.5% year-over-year, slightly improving from the anticipated -2.8% and October’s -2.9%. These figures underline challenges revitalizing China's manufacturing base amid subdued global demand and price pressures.