China Macro Data Disappoints As MOFCOM Threatens Retaliation For ZTE Ban

China Macro Data Disappoints As MOFCOM Threatens Retaliation For ZTE Ban

With the yuan at its strongest since devaluing in 2015…

and lunar new year distortions starting to wash out of the macro-surprise data… (Monthly data for January and February are often plagued by shifts in the lunar new year holidays in China. For today’s March numbers, we should really be past that — although last week’s trade numbers still had a surprise impact.)

Tonight’s smorgasbord of Chinese economic data is the first glimpse of the state of the economy as the credit impulse slipped negative and the crackdown on shadow banking (and implicitly leverage) began.


Commodities are leading the China bubble for now, with bonds and stocks having been bubbled-through…

And China stocks (red) are notably underperforming their Asia-Pac peers (green)…


So, the markets need some hope to cling to and so we strongly doubt GDP will be allowed to miss. Bloomberg notes that the backdrop to today’s data is that China is broadly expected to slow somewhat this year, after last year it saw the first acceleration in growth since 2010, when China — and the rest of the world — was bouncing back from the global recession.

  • China Q1 GDP YoY MEET at 6.8%, versus +6.8% exp. and +6.8% prior.

  • China Retail Sales YoY BEAT at 10.1%, versus +9.7% exp. and +9.4% prior.

  • China Industrial Production YoY MISS at 6.0%, versus +6.3% exp. and +6.2% prior.

  • China Fixed Asset Investment YoY MISS at 7.5%, versus +7.7% exp. and +7.9% prior.

Notably, China Q1 GDP QoQ disappointed however, rising only 1.4% QoQ (versus expectations of a 1.5% QoQ jump…

So the initial sign is some softening in the industrial part of the economy, and strong growth in the consumer side.

This one will disappoint President Trump: Steel production still growing…

  • First Quarter Crude Steel Output Rises 5.4% to 212.15M Tons

  • March Crude Steel Output Rises 4.5% Y/Y to 73.98M Mt

  • March Steel Product Output Rises 4.2% to 89.77M Tons

Bloomberg’s Chris Anstey notes that on the softening in industrial-output growth, Goldman Sachs economists had warned that weather conditions in March weren’t favorable for reducing pollution — so authorities probably put more restrictions on production, construction, and transportation.

Additionally, a new indicator – the monthly survey-based urban unemployment rate will be introduced today, providing a reading on China’s labor market.

The NBS may start publishing China’s monthly surveyed unemployment rate (SUR) very soon. The government has long been in a dilemma: cares much about employment but lacked an effective gauge. SUR, we believe, is necessary for guiding the economic transition toward high-quality growth. Compiled according to international standards, the SUR defines the unemployed (the numerator) as people of working age (above 16) who are out of work, want a job, have actively sought work in the previous three months and are available to start work within the next two weeks.

Meanwhile, the Hong Kong Dollar remains glued to its peg band’s lower limit with HKMA intervention not helping for now…

The Hong Kong Monetary Authority has bought a total of HK$19.02b ($2.4b) worth of Hong Kong dollars since the currency fell to the weak end of its trading band last week, according to data compiled by Bloomberg. This includes HK$9.36b of purchases in the past 24 hours. No need to proactively adjust the local dollar’s interest rates, as that would easily lead to doubts over the city’s determination in defending the linked exchange rate, HKMA says in an emailed statement.

But, despite this statement (raising rates would counter the USD Libor carry trade flows), when  former Hong Kong Monetary Authority Chief Executive Joseph Yam said there IS room for Hong Kong to adjust interest rates and additional exchange fund bill sales can be an option, the dollar strengthened


Finally, it appears the trade wars are anything but fading as China’s Ministry of Commerce said in a statement on its website that China has noticed U.S. Commerce Department’s export restriction on ZTE, and will take necessary measures to protect Chinese companies’ interests.

Trading of ZTE shares in Hong Kong suspended from 9am pending release of inside information announcement on the activation of denial order by U.S., it says in filing to Hong Kong stock exchange.

The statement went on to note that ZTE has cooperated with hundreds of U.S. companies and has contributed tens of thousands of jobs in the U.S.; and China hopes U.S. to fairly deal with the matter based on rules and regulations, and ensure fair, stable environment for company.


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