Winter is coming to China

CHINA ADVISORY - Report 02 Jan 2019 by Andrew Collier

Recent data on employment and investment in fixed assets suggests a modest stimulus will lead to improvements in China’s economy. However, a closer look at local polls, along with other research, indicates that employment is much weaker than stated in the official data.

Because macro data tends to lag behind the real economy, we examined several leading indicators. These include job posts, the number of job applicants, and recruitment ads. These indicators indicate that labor demand in China is deteriorating. As employment is a key measure of the success of economic policies in China, this data will increase pressure on Beijing to stimulate the economy. However, we are skeptical that announced tax cuts will be adequate, given the need for local tax revenue, and any monetary stimulus will be diluted by interest cost on existing debt.

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