Latest news with #RaymondYeung
Japan Times
6 days ago
- Business
- Japan Times
China's growth momentum offers Xi rare window to fight deflation
China's humming factories threw a lifeline to an economy struggling with weak demand in the second quarter. That's also given policymakers space to fight deflation — if they choose to do more than just hitting their growth target. Gross domestic product beat expectations to grow 5.2% between April and June, bringing the official 5% expansion goal for the year within reach. But while strong exports made up for sluggish consumption at home, they also masked a worsening decline in prices that threatens to drag the world's second-largest economy into a prolonged slowdown. Nominal GDP, which accounts for price changes, grew only 3.9%, the least outside the pandemic since the quarterly data began in 1993. The GDP deflator, a measure of economywide prices, extended the longest streak of decline on record. This persistent deflation fuels a dangerous cycle: As consumers withhold purchases in anticipation of further price drops, business profits and wages will suffer, further dampening the appetite to spend. "I worry that policymakers will be complacent because of the good GDP numbers,' said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group. "They shouldn't ignore that deflation is the most urgent problem now.' A delay in further stimulus risks exacerbating sluggish consumer confidence, which remains weighed down by a worsening property market. Continued reliance on exports, which made up almost a third of growth in the first half of the year, also leaves the economy vulnerable to external shocks. While the outcome of tariff talks with the U.S. remains unclear, exports are already expected to slow in the coming months as the effect of front-loading fades, with economists forecasting growth to decline sharply to 2% for the year. A drop in overseas shipments would not just hurt growth but also worsen the oversupply at home and put even more pressure on prices. With expansion in the first six months now standing at 5.3%, banks including Nomura Holdings and Goldman Sachs Group have revised up their forecasts for the economy. The improved outlook offers leader Xi Jinping a rare opportunity to tackle sticky deflation before real growth starts to falter. The Chinese president signaled his intent to do so earlier this month, when he and other top officials offered their bluntest assessment yet of the cutthroat competition that's been dragging down prices and profits across industries. Reining in overcapacity may also ease China's tensions with trading partners, who have increasingly complained of a flood of Chinese products drowning out local competition. "Curbing excessive competition could have a negative impact on the economy in the short term, so it needs to be pushed forward when the economy is relatively stable,' said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered. But such a pivot won't be easy. As Chinese consumers remain reluctant to spend, tackling deflation means cutting supply and production capacity — effectively allowing less efficient or unprofitable companies to fail. To curb price wars, authorities will likely prevent local governments from supporting companies trapped in chronic losses, encourage mergers and tighten competition rules, Ding said. A key challenge lies in the nature of industries suffering from price wars. Many are emerging sectors where significant production capacity was built only in recent years, said Jacqueline Rong, chief China economist at BNP Paribas. That makes it difficult to identify outdated capacity for shutdown, unlike a 2015 supply-side reform targeting traditional heavy industries. "Unless we see significant progress in production or capacity cuts across industries, the problem of low prices is bound to persist in the second half the year,' Rong said. Other than industrial capacity, economists believe authorities will focus on supporting the ailing property sector in the coming months. Home prices fell at a faster pace in June, in a yearslong slump that erodes homeowner wealth and make them less inclined to spend. In a sign of policy in the works, Xi this week called for the acceleration of a "new model' for property development, advocating a more measured approach to urban planning and upgrades. While falling short of some investors' expectations for more aggressive measures, it's not uncommon for China's top leaders to set a general policy direction and task lower-level officials with working out specifics. Goldman Sachs economists including Lisheng Wang expect modest easing steps including further cuts to mortgage rates and greater policy support for urban village renovation and some urban infrastructure, they wrote in a Tuesday note. Despite signals of policy actions on the supply side, some economists are worried that a lack of direct stimulus for domestic demand will ultimately hobble China's efforts to ease deflation. The People's Bank of China appears comfortable keeping its current policy stance without further easing moves in the near term. Deputy Gov. Zou Lan said in a Monday briefing the central bank will monitor the impact of measures already implemented while repeating its vow to maintain a moderately loose monetary policy. Economists generally expect the monetary authority to deliver another round of moderate interest rate cut between 10 and 20 basis points in the fourth quarter, when growth may slow. The impact of government subsidies, which drove consumption and investment growth, could weaken then due to a higher base late last year. Authorities may also step up fiscal stimulus modestly once the economy loses steam. Policymakers planned a 500 billion yuan ($70 billion) program for infrastructure investment via policy bank financing as well as a nationwide child subsidy. Larry Hu, chief China economist at Macquarie Group, said policymakers will have little motivation to boost domestic demand, given the strong export and manufacturing performance. "Ideally, China would do more to boost demand even if it hits 5% growth,' said Hu, adding that it will make the economy more balanced. "The Chinese government will just do enough to hit 5% growth.'
Yahoo
6 days ago
- Business
- Yahoo
China's Growth Momentum Offers Xi Rare Window to Fight Deflation
(Bloomberg) — China's humming factories threw a lifeline to an economy struggling with weak demand in the second quarter. That's also given policymakers space to fight deflation — if they choose to do more than just hitting their growth target. Advocates Fear US Agents Are Using 'Wellness Checks' on Children as a Prelude to Arrests LA Homelessness Drops for Second Year Gross domestic product beat expectations to grow 5.2% between April and June, bringing the official 5% expansion goal for the year within reach. But while strong exports made up for sluggish consumption at home, they also masked a worsening decline in prices that threatens to drag the world's second-largest economy into a prolonged slowdown. Nominal GDP, which accounts for price changes, grew only 3.9%, the least outside the pandemic since the quarterly data began in 1993. The GDP deflator, a measure of economy-wide prices, extended the longest streak of decline on record. This persistent deflation fuels a dangerous cycle: As consumers withhold purchases in anticipation of further price drops, business profits and wages will suffer, further dampening the appetite to spend. 'I worry that policymakers will be complacent because of the good GDP numbers,' said Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group Ltd. 'They shouldn't ignore that deflation is the most urgent problem now.' A delay in further stimulus risks exacerbating sluggish consumer confidence, which remains weighed down by a worsening property market. Continued reliance on exports, which made up almost a third of growth in the first half of the year, also leaves the economy vulnerable to external shocks. While the outcome of tariff talks with the US remains unclear, exports are already expected to slow in the coming months as the effect of front-loading fades, with economists forecasting growth to decline sharply to 2% for the year. A drop in overseas shipments would not just hurt growth but also worsen the oversupply at home and put even more pressure on prices. With expansion in the first six months now standing at 5.3%, banks including Nomura Holdings Inc. and Goldman Sachs Group Inc. have revised up their forecasts for the economy. The improved outlook offers President Xi Jinping a rare opportunity to tackle sticky deflation before real growth starts to falter. The Chinese leader signaled his intent to do so earlier this month, when he and other top officials offered their bluntest assessment yet of the cutthroat competition that's been dragging down prices and profits across industries. Reining in overcapacity may also ease China's tensions with trading partners, who have increasingly complained of a flood of Chinese products drowning out local competition. 'Curbing excessive competition could have a negative impact on the economy in the short term, so it needs to be pushed forward when the economy is relatively stable,' said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered. But such a pivot won't be easy. As Chinese consumers remain reluctant to spend, tackling deflation means cutting supply and production capacity — effectively allowing less efficient or unprofitable companies to fail. To curb price wars, authorities will likely prevent local governments from supporting companies trapped in chronic losses, encourage mergers and tighten competition rules, Ding said. A key challenge lies in the nature of industries suffering from price wars. Many are emerging sectors where significant production capacity was built only in recent years, said Jacqueline Rong, chief China economist at BNP Paribas. That makes it difficult to identify outdated capacity for shutdown, unlike a 2015 supply-side reform targeting traditional heavy industries. 'Unless we see significant progress in production or capacity cuts across industries, the problem of low prices is bound to persist in the second half the year,' Rong said. Other than industrial capacity, economists believe authorities will focus on supporting the ailing property sector in the coming months. Home prices fell at a faster pace in June, in a yearslong slump that erodes homeowner wealth and make them less inclined to spend. In a sign of policy in the works, Xi this week called for the acceleration of a 'new model' for property development, advocating a more measured approach to urban planning and upgrades. While falling short of some investors' expectations for more aggressive measures, it's not uncommon for China's top leaders to set a general policy direction and task lower-level officials with working out specifics. Goldman Sachs economists including Lisheng Wang expect modest easing steps including further cuts to mortgage rates and greater policy support for urban village renovation and some urban infrastructure, they wrote in a Tuesday note. Despite signals of policy actions on the supply side, some economists are worried that a lack of direct stimulus for domestic demand will ultimately hobble China's efforts to ease deflation. The People's Bank of China appears comfortable keeping its current policy stance without further easing moves in the near term. Deputy Governor Zou Lan said in a Monday briefing the central bank will monitor the impact of measures already implemented while repeating its vow to maintain a moderately loose monetary policy. Economists generally expect the monetary authority to deliver another round of moderate interest rate cut between 10 and 20 basis points in the fourth quarter, when growth may slow. The impact of government subsidies, which drove consumption and investment growth, could weaken then due to a higher base late last year. Authorities may also step up fiscal stimulus modestly once the economy loses steam. Policymakers planned a 500 billion yuan ($70 billion) program for infrastructure investment via policy bank financing as well as a nationwide child subsidy, Bloomberg News reported in May. Larry Hu, chief China economist at Macquarie Group Ltd., said policymakers will have little motivation to boost domestic demand, given the strong export and manufacturing performance. 'Ideally, China would do more to boost demand even if it hits 5% growth,' said Hu, adding that it will make the economy more balanced. 'The Chinese government will just do enough to hit 5% growth.' 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South China Morning Post
04-07-2025
- Business
- South China Morning Post
Did Trump get his ‘Big Beautiful Bill' at the US dollar's expense?
The passage of a sprawling budget bill has raised concerns over the long-term debt of the United States, which analysts said could compound already heightened worries over the reliability of the country's currency as a safe-haven asset. Advertisement Winning a narrow 218-214 vote in the House of Representatives on Thursday, the 'One Big Beautiful Bill Act' – which raises spending on border security and defence while making the record tax cuts enacted in 2017 permanent – now heads to US President Donald Trump for his signature, which he is expected to give on Friday. It is also set to raise the federal government's debt ceiling by US$5 trillion, surpassing the US$4 trillion allocated by an earlier version of the bill. This creates more room for the Treasury Department to borrow to repay future obligations, but allows for greater debt accrual in the future. Raymond Yeung, chief Greater China economist at ANZ, said while the bill may lower the immediate risk of a government default, it also deepens worries over US debt sustainability and the interest rate structure. 'In the months leading up to the bill's passage, investors had already been discussing how to diversify risk and reduce their exposure to US dollar assets,' he said. Advertisement Even without the bill, Yeung noted, momentum for diversification has been building in a number of countries.
Yahoo
09-06-2025
- Business
- Yahoo
When pegs fly: Trump-induced turbulence hits Hong Kong dollar, interest rates
By Rae Wee and Jiaxing Li SINGAPORE/HONG KONG (Reuters) -U.S. President Donald Trump's erratic policies are rattling a currency peg that has withstood the test of time and is seen as an anchor for China and Asia. The Hong Kong dollar has whipsawed from one end of its narrow trading band to the other versus the greenback in just a month. While the latest volatility is not seen as a threat to the four-decade-old peg, the it has had a dramatic impact on interest rates, providing a challenging environment for businesses and investors in the financial hub. The stress on one of the world's best-known currency pegs underscores how volatility in the U.S. dollar under Trump is disrupting even the most stable corners of the market. Interest rates in Hong Kong have tended to move in lockstep with the United States, keeping the Hong Kong dollar - which trades between 7.75 and 7.85 per U.S. dollar - relatively stable. But they have decoupled over the past month as global investors cooled on U.S. assets and fretted about Washington's growing debt pile, while massive capital entered Hong Kong as foreigners flocked to blockbuster share offerings. Chinese investors have also ploughed record amounts of money into Hong Kong-listed stocks. "The pace and speed of inflow was quite surprising," said Raymond Yeung, ANZ's chief economist for Greater China. The volatility forced the Hong Kong Monetary Authority (HKMA), the city's de-facto central bank, to intervene in the foreign exchange market four times in May as the Hong Kong dollar bumped up against the strong end of its trading band. That caused borrowing costs in Hong Kong to plunge to record lows, tempting speculators to short-sell the currency and drive it swiftly to 7.85, the weak end of the band. As Hong Kong rates fell, the gap between U.S. three-month rates and the benchmark in Hong Kong hit a record high last week, based on LSEG data stretching back to 2020. Spreads across other tenors similarly widened. Analysts say it is normal to see an occasional deviation in rates between the Hong Kong dollar and U.S. dollar, but the abrupt moves seen in recent weeks are worrisome for businesses and investors - especially given disruptions to global trade and other uncertainty. "If the gap closes abruptly, then firms and households and the financial system in Hong Kong might suffer from a large interest rate shock, which is not good for financial stability," ANZ's Yeung said. Hong Kong officials have sought to reassure markets that the peg is here to stay, and that despite the increased volatility, there are some benefits to the current low level of rates. The city's leader John Lee told SCMP in an interview published on Monday that the city will maintain its currency's peg to the dollar. HKMA chief Eddie Yue noted the impact of lower interest rates on individuals and corporates would vary, depending on their relative positions in bank deposits and borrowings. "However, looking at it through a macroeconomic lens, lower interest rates should be beneficial to the current economic environment of Hong Kong," he said in a blog post. Lower mortgage rates seem to have helped the economy's flagging property market, with home prices edging up in April to end four months of decline. The government too has used the opportunity to access cheaper borrowing for longer. It issued 30-year bonds, its longest tenor debt, for the first time last month. "It's a good time for Hong Kong to lock in the low funding," said Lei Zhu, head of Asian fixed income at Fidelity International. Sign in to access your portfolio
Reuters
09-06-2025
- Business
- Reuters
When pegs fly: Trump-induced turbulence hits Hong Kong dollar, interest rates
SINGAPORE/HONG KONG, June 9 (Reuters) - U.S. President Donald Trump's erratic policies are rattling a currency peg that has withstood the test of time and is seen as an anchor for China and Asia. The Hong Kong dollar has whipsawed from one end of its narrow trading band to the other versus the greenback in just a month. While the latest volatility is not seen as a threat to the four-decade-old peg, the it has had a dramatic impact on interest rates, providing a challenging environment for businesses and investors in the financial hub. The stress on one of the world's best-known currency pegs underscores how volatility in the U.S. dollar under Trump is disrupting even the most stable corners of the market. Interest rates in Hong Kong have tended to move in lockstep with the United States, keeping the Hong Kong dollar - which trades between 7.75 and 7.85 per U.S. dollar - relatively stable. But they have decoupled over the past month as global investors cooled on U.S. assets and fretted about Washington's growing debt pile, while massive capital entered Hong Kong as foreigners flocked to blockbuster share offerings. Chinese investors have also ploughed record amounts of money into Hong Kong-listed stocks. "The pace and speed of inflow was quite surprising," said Raymond Yeung, ANZ's chief economist for Greater China. The volatility forced the Hong Kong Monetary Authority (HKMA), the city's de-facto central bank, to intervene in the foreign exchange market four times in May as the Hong Kong dollar bumped up against the strong end of its trading band. That caused borrowing costs in Hong Kong to plunge to record lows, tempting speculators to short-sell the currency and drive it swiftly to 7.85, the weak end of the band. As Hong Kong rates fell, the gap between U.S. three-month rates and the benchmark in Hong Kong hit a record high last week, based on LSEG data stretching back to 2020. Spreads across other tenors similarly widened. Analysts say it is normal to see an occasional deviation in rates between the Hong Kong dollar and U.S. dollar, but the abrupt moves seen in recent weeks are worrisome for businesses and investors - especially given disruptions to global trade and other uncertainty. "If the gap closes abruptly, then firms and households and the financial system in Hong Kong might suffer from a large interest rate shock, which is not good for financial stability," ANZ's Yeung said. Hong Kong officials have sought to reassure markets that the peg is here to stay, and that despite the increased volatility, there are some benefits to the current low level of rates. The city's leader John Lee told SCMP in an interview published on Monday that the city will maintain its currency's peg to the dollar. HKMA chief Eddie Yue noted the impact of lower interest rates on individuals and corporates would vary, depending on their relative positions in bank deposits and borrowings. "However, looking at it through a macroeconomic lens, lower interest rates should be beneficial to the current economic environment of Hong Kong," he said in a blog post. Lower mortgage rates seem to have helped the economy's flagging property market, with home prices edging up in April to end four months of decline. The government too has used the opportunity to access cheaper borrowing for longer. It issued 30-year bonds, its longest tenor debt, for the first time last month. "It's a good time for Hong Kong to lock in the low funding," said Lei Zhu, head of Asian fixed income at Fidelity International.
