Next Week in China: 9-13 December 2024

00:00

Major Data Releases:

9 December: China to report November Consumer Price Index (CPI)
9 December: China to report November Producer Price Index (PPI)
10 December: China to report November growth in money supply
10 December: China to report November Total Social Financing (TSF)
10 December: China to report new renminbi-denominated (RMB) loans in November
10 December: China to report November trade balance
12 December: Hong Kong to report Q3 Producer Price Index for the industrial sector
13 December: Hong Kong to report Q3 gross national income

The pace of major economic data releases will pick up next week, with seven key points scheduled for release.

With respect to Total Social Financing (TSF) and new RMB loans granted in November, Mainland China is currently in an intensive government debt restructuring cycle. We expect that in the coming period, net corporate loan growth will weaken as local government bonds meant to replace existing hidden debt were issued on a large scale in November. This large-scale local government bond issuances will continue going forward. New debt papers will replace some of the maturing bank loans of urban investment platforms, which will reduce the scale of new lending for the month. We expect new loans in November to reach around RMB 800 billion (USD 110 billion), showing a large seasonal month-on-month increase, but a decrease of nearly RMB 300 billion (USD 41 billion) when compared to November 2023 due to hidden debt replacement. Meanwhile, the year-on-year growth rate of TSF stock in November is anticipated to reach 7.9 per cent.

With respect to inflation, the November CPI is expected to decline slightly by 0.2 per cent year-on-year, with a month-on-month decrease of approximately -0.5 per cent. This would be slower than the 0.3 per cent inflation recorded in October. Meanwhile, the PPI is expected to narrow slightly from a 2.9 per cent decline to around -2.8 per cent, with a month-on-month change of approximately -0.2 per cent. Producer prices have recorded annualized declines since October 2022. Business activity indices related to residents’ travel consumption, including retail, accommodation, and catering industries, have declined by varying degrees due to the fading effect of the Golden Week holiday for National Day last October. Combined with seasonal factors, core CPI is expected to be around -0.1 per cent month-on-month.

The main raw materials purchase price index and factory gate price index from the Purchasing Managers’ Index were at 49.8 per cent and 47.7 per cent, respectively, in November, declining by 3.6 and 2.2 percentage points from the previous month. Both indices have fallen below the 50-point expansion/contraction line again, indicating reduced manufacturing activity for the month. With upstream and downstream prices falling simultaneously, the overall supply-demand imbalance continues to persist, causing the PPI to remain roughly at the same level as the previous month.

For equity markets, as of Thursday, 5 December, the MSCI China Index picked up by 0.92 per cent for the week. The Shanghai Composite Index rose by 1.27 per cent and the Shenzhen Component Index gained 0.21 per cent while the ChiNext Index declined by 0.11 per cent. In terms of market capitalization, small and mid-cap stocks continued to outperform large-cap stocks this week. Meanwhile, value stocks were favoured over growth stocks during this period. Looking forward, the Politburo assembly and the Central Economic Work Conference to be held on 11-12 December will set China’s economic policy tone for 2025. The market generally expects positive signals from these meetings.

This piece has been co-produced with Yiyi Capital Limited in Hong Kong, a China specialist and a part of a global financial services group.