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Andrew Mullen

Global Impact is a weekly curated newsletter featuring a news topic originating in China with a significant macro impact for our newsreaders around the world. Sign up now!
September had, seemingly, started somewhat well for China’s economy as trade data for August showed its signature exports grew at their fastest pace in 17 months.
But after President Xi Jinping had subtly toned down China’s focus on achieving its annual economic growth goals this year, disappointing data for August
led analysts to question if the world’s second-largest economy could in fact meet its “around 5 per cent” GDP growth target.
Exports have long been the poster child for China’s economic growth, and in August, shipments beat expectations by seeing a year-on-year rise of 8.7 per cent
, with the year-on-year export values growing at the fastest pace in 17 months, while export volumes also hit a record high.
China’s imports, though, rose by just 0.5 per cent from a year earlier in August, compared with the 7.2 per cent growth seen in July, surprising on the downside.


Analysts said a higher base for comparison played a role, but import volumes also declined, month on month.
In terms of trade partners, exports to the Association of Southeast Asian Nations, Russia, the United States and the European Union all increased in August.
Shipments to the US grew for the third straight month, while shipments to the EU marked their highest export growth in two years.
But this is where the problems lie, with exports facing new hurdles in the form of increased tariffs from the US and its Western allies.
And as China’s consumption, industrial activity and investment continued to soften in August, economists warned “time is running out” for significant stimulus to shore up momentum and ensure it achieves its “around 5 per cent” growth target for the year.
Retail sales, a key gauge of consumption, missed expectations with a year-on-year rise of 2.1 per cent in August, just avoiding a new post-pandemic low.


Property investment in China – a figure that has sagged amid persistent uncertainties in the real estate market – dropped by 10.2 per cent, year on year, in the first eight months of the year, matching the fall recorded in the January-July period.
And China’s industrial output rose in August by 4.5 per cent, year on year, lower than the 5.1 per cent growth seen in July, as growth momentum dipped for a fourth straight month.
Analysts at Goldman Sachs responded to the “disappointing” August data by cutting their forecast for China’s overall economic growth this year from 4.9 per cent to 4.7 per cent.
And Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, said that if the current economic momentum continued, China’s GDP growth would likely undershoot the “around 5 per cent” target for this year.
Lynn Song, chief economist for Greater China at ING, said that it would be “challenging” for China to reach its “around 5 per cent” growth target without significant changes, and that “time is running low for policymakers to introduce measures to buoy the economy amid numerous headwinds”.
The target, though, might be less of a concern for officials after Xi said that China should “strive to fulfil economic and social development goals” for 2024.
It is true that the Fed’s pivot has eased pressure on the yuan, removing one barrier to PBOC easing
Zichun Huang, Capital Economics
Beijing’s top leadership had said in the communique following July’s third plenum that China “must remain firmly committed” to accomplishing this year’s goals.
This week’s interest-rate cut by the US Federal Reserve, though, could offer China and other Asian economies more room to carry out easing policies and boost growth, analysts said.
The Fed announced a cut of its benchmark borrowing rate by half a percentage point “in light of the progress on inflation and the balance of risks”.
It is unclear if, or even when, China will respond, with the potential for some “modest cuts” in key policy rates in the rest of 2024, potentially by one-tenth of a per cent, analysts said.
China had cut its key short-term policy rate and the mortgage reference rate in July, but turned down the first chance to respond to the cut by the Fed after unexpectedly leaving key rates unchanged on Friday.
Zichun Huang, China economist at Capital Economics, said the lack of any reduction to China’s policy rates, despite the clear economic case for doing so, underscored the extent to which the PBOC remains constrained by concerns about bank profitability and declining long-term bond yields.
“It is true that the Fed’s pivot has eased pressure on the yuan, removing one barrier to PBOC easing – the Chinese currency is now its strongest against the US dollar since May last year. But the PBOC is not one to blindly follow the Fed – monetary conditions in China are much less correlated with the US than many other countries,” said Huang, who expected a 10-basis-point reduction in policy rates in the next quarter and 20 basis points worth of reductions in 2025.
60-Second Catch-up
China unexpectedly leaves key rates unchanged despite Fed cut.
Fed rate cut to reduce yuan outflow pressure, open up room for China’s easing: analysts.
President Xi Jinping tones down focus on China’s growth targets as headwinds mount.
China’s ‘time running out’ to meet growth target as August figures falter.
Explainer: Where now for China after economy lost momentum ‘across the board’ in August?.
‘Deflation concerns’ remain as China’s consumer inflation misses expectations.
Explainer: Will weak demand continue in China?: 4 takeaways from August’s inflation data.
China’s exports show ‘strong competitiveness’ in August, but challenges remain.
Explainer: Can China’s export momentum last? 5 takeaways from August trade data.
China won’t budge as it resists EV tariffs from EU, state broadcaster says.
Deep Dives

Dump or buy more? China’s holding of US debt in spotlight after Fed’s rate cut

Continued diversification of reserve portfolio may be in order, but into what, and at what speed, are pressing questions

While viewing China as less likely to dump US government bonds amid easing pressure on the yuan from lower US interest rates, analysts warn that Beijing’s ongoing diversification plan still prevents it from adding a significant amount of US Treasuries.
Foreign holdings of US Treasuries rose to a record high in July in anticipation of the Federal Reserve’s rate cut, data from the US Department of the Treasury showed on Wednesday.
Read more.

Economist Jin Keyu on why the trade war is still a ‘gift for China’

Jin Keyu of the London School of Economics says the frequently invoked ideas of a ‘middle-income trap’ and ‘overcapacity’ are overblown.

Jin Keyu is a Harvard-trained economist currently serving as an associate professor at the London School of Economics. In The New China Playbook: Beyond Socialism and Capitalism, Jin argues China’s system remains well-positioned to resolve the problems weighing down its economy, and that calls for the country to adopt a model more attuned to the West miss several qualities that have been essential to its success.
In this latest interview in the Open Questions series, Jin discusses these misunderstandings in more detail and lays out her thoughts on how the world can continue to cooperate even in an era of heightened geopolitical tensions. This interview first appeared in SCMP Plus. For other interviews in the Open Questions series, click here.
Read more.

Economist Marc Uzan on how China can help reshape the global financial system

With the US-led financial consensus at a crossroads, economist Marc Uzan says China has role to play in systemic reform

French economist Marc Uzan is executive director and founder of the Reinventing Bretton Woods Committee, a non-profit organisation established in 1994 to address issues related to the world’s financial architecture. He has been working closely with central banks and finance ministries around the world, as well as international organisations such as the International Monetary Fund and the Group of 20, to bring stakeholders together to attempt to fix the system.
In this latest interview in the Open Questions series, Uzan reflects on the decades of change since the paradigmatic Bretton Woods conference in 1944, and the role China and other emerging economies will play in the global financial system during an era of heightened unilateralism and confrontation. This interview first appeared in SCMP Plus. For other interviews in the Open Questions series, click here.
Read more.

China trade tased from all sides, backing Beijing into economic bind: analysts

‘The risk of intensifying trade wars is very real’

China’s export growth faces increasing risks as pressure to raise import tariffs spreads beyond advanced countries to less-developed ones amid tit-for-tat retaliations and concerns about excess capacity, according to analysts.
The world’s second-largest economy, long seen as the so-called workshop of the world, has been on the receiving end of measures targeting its solar panels, electric vehicles (EVs), steel, aluminium and even low-value retail goods.
Read more.

‘He dares to speak the truth’: China’s ‘conscientious economist’ goes viral

Straightforward and critical remarks by Northeast Securities’ chief economist Fu Peng on China’s economy have gone viral on Chinese social media

An outspoken economist has gone viral on Chinese social media as his down-to-earth comments about China’s slowing economy struck a chord with the general public.
Fu Peng, chief economist at brokerage firm Northeast Securities, addressed a slew of issues, including the stock market slump and the real estate crisis, at the 2024 Phoenix Financial Forum for the Greater Bay Area at the start of September.
Read more.

What, where, how: the next 10 years of China’s evolving Belt and Road Initiative

Gone may be the days when huge infrastructure projects left partner countries holding a big bill and facing environmental implications

The Belt and Road Initiative, an ongoing effort to link economies into a China-centred trade network, largely via Chinese-backed megaprojects abroad, has entered a phase that Beijing says involves “small but beautiful” additions.
As the plan to grow global trade approaches its 11th anniversary, the ambitious undertaking is expected to shift away from massive projects that have sometimes been accused of resulting in large debt piles or environmental damage in other countries.
Read more.

‘Tenuous’ link between uneven China-US trade, industrial policy: IMF economists

International Monetary Fund report released on same day China’s Ministry of Commerce unveiled its findings on US compliance with the World Trade Organization

Worries that the trade imbalance between China and the United States resulted from industrial policies reflect an “incomplete” view, according to economists from the International Monetary Fund (IMF).
The view came at a time when Washington, together with its Western allies, have been critical of Beijing’s industrial overcapacity and massive export machine, resulting in tariffs on made-in-China products, including electric vehicles (EVs).
Read more.
Global Impact is a weekly curated newsletter featuring a news topic originating in China with a significant macro impact for our newsreaders around the world.
Sign up now!


China’s ‘time running out’ to meet economic growth target as August figures falter

China’s 100-billion-yuan question: does rare government bond purchase alter policy course?

As China’s job market shrinks, graduates forced to scale back career ambitions

How 5 international brands are charting growth in China despite miserly consumers

China's economic recovery

Employees producing basketballs at a factory in Sihong, in eastern China’s Jiangsu province. Photo: AFP

Employees working on a jelly production line at a food factory in Suqian, in eastern China’s Jiangsu province. Photo: AFP

Photo: Reuters

Illustration: Lau Ka-kuen

Photo: AFP

China’s video game achievement may be anomaly for years to come despite Black Myth: Wukong

A woman holds up an umbrella as it rains near an advertisement promoting blockbuster Chinese video game Black Myth: Wukong in Beijing. Photo: AP

A boy plays the video game Black Myth: Wukong in the Sony store in Shanghai. Photo: EPA-EFE

Illustration: Brian Wang

Photo: SCMP composite/Baidu/Weibo

Photo: Game Science

Photo: Bloomberg

Photo: AP

Japan faces uncertainties amid threats from China abroad and political and earthquake fears at home

Japan’s Prime Minister Fumio Kishida. Photo: AP

Japanese Foreign Minister Yoko Kamikawa with Chinese counterpart Wang Yi. Photo: Kyodo

Illustration: Victor Sanjinez Garcia

Photo: Handout

Photo: Japan’s Ministry of Defence /AFP

Photo: X/JASDF

Photo: Kyodo

China celebrates Deng Xiaoping, but how has ‘true heir’ Xi Jinping taken up the reins?

Tourists pose for a photo in front of a bronze statue of late Chinese leader Deng Xiaoping. Photo: Kyodo

A large screen in Beijing shows President Xi Jinping making a speech at a memorial event marking the 120th anniversary of the birth of the late Chinese leader Deng Xiaoping. Photo: Kyodo

Illustration: Henry Wong

Harris-Walz in spotlight over China ties as Democrats rubber-stamps ticket

Democratic presidential nominee, Vice-President Kamala Harris, arrives to speak on the final day of the Democratic National Convention. Photo: AP

The end of the fourth and last day of the Democratic National Convention at the United Centre in Chicago. Photo: AFP

Photo: Abaca Press/TNS

Photo: EPA-EFE

Photo: Los Angeles Times/TNS

Photo: The National Bobblehead Hall of Fame and Museum

Photo: The Philadelphia Inquirer/TNS

China expands export controls on drones, parts with potential for military use

Workers assemble civilian multi-rotor drones at a production workshop of a drone factory in Nanjing, Jiangsu province. Photo: Future Publishing via Getty Images

Employees work on the production line for drones at a workshop in Anqing, Anhui province. Photo: Reuters

Photo: Xinhua

Photo: Japan’s Defense Ministry

Photo: SCMP composite/Douyin

Economy

China Economy

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In this week’s issue of the Global Impact newsletter, we look at the state of play within China’s economy


In this week’s issue of the Global Impact newsletter, we look at the state of play within China’s economy.


China economy

China GDP

Global impact | China’s ‘time running out’ to meet economic growth target as August figures falter

In this week’s issue of the Global Impact newsletter, we look at the state of play within China’s economy