Asia

Overview There was nothing in China’s latest data release to fundamentally change our views around its economy – authorities continue to prioritise the supply side of the economy, which, in the face of subdued domestic demand, is expanding export volumes and leading to growing trade tensions with other major economies. Our forecasts are unchanged – we see growth at 4.7% this year (below the full year target) and easing further to 4.6% in 2025 and 4.4% in 2026. Growth in industrial production has trended lower in recent months, down to 5.1% yoy in July (compared with 5.3% yoy in June and 6.7% yoy in April). While conditions in construction related sectors remains weak, output in the electronics sector remains comparatively strong. There was a noticeable slowing in real investment...

After cash-strapped Pakistan secured a new $7 billion (€6.5 billion) bailout package from the International Monetary Fund (IMF) in July, Islamabad has started talks with Beijing on reprofiling billions in Chinese debt as it seeks to enact economic reforms. On the table are proposals to delay at least $16 billion in energy sector debt to China, along with extending the term of a $4 billion cash loan facility due to depleting foreign exchange reserves. Last week, Pakistani Finance Minister Muhammad Aurangzeb was in Beijing to present proposals on extending the maturity of debt for nine power plants built by Chinese companies under the multibillion-dollar Pakistan China Economic Corridor (CPEC). On Friday, Prime Minister Shehbaz Sharif told a feder...

China’s economic development over the last several decades has been remarkable amid rapid growth. We project growth will remain resilient at around 5 percent in 2024, despite the continued property sector adjustment. At the same time, China has relied too much on investment as opposed to consumption. Diminishing productivity and an aging population risk restricting growth, which we expect to slow significantly in coming years, to around 3.3 percent in 2029. Addressing these challenges requires a comprehensive and balanced policy approach. Given these circumstances, the country’s service sector is an underexploited driver of growth—which was also recognized at the Third Plenum. Reallocating resources to services has helped boost productivity over the past two decades. And i...

Manufacturing and non-manufacturing PMIs both edged slightly lower in July dragged down by weak domestic demand Manufacturing PMI remained in contraction China's July official manufacturing PMI slowed slightly to 49.4, down from 49.5 in June. This marked the third consecutive month the PMI has been below 50 - the threshold between expansion and contraction - and also marked a 5-month low.  By subcategory, we saw some mixed performances but generally, the more important subcategories trended a little weaker. The biggest decline was in production, which fell from 50.6 to 50.1. New orders also fell further into contraction from 49.5 to 49.3, as domestic demand remains sluggish. In contrast, we saw slightly smaller contractions in new export orders (48.5) and imports (47.0)...