DeepDive: Data Dump January 2024

China’s macro data remained uninspiring in December. Households maintained pessimistic expectations regarding job prospects and wages, while loan demand continued to be low amid persistently high deposit levels. While corporate loan growth was robust year to date, narrow money supply growth (M1) remained lacklustre. The market appears to be disappointed with last week’s policy decision to keep lending rates unchanged, which we attribute to a misinterpretation of policy communication from late last year. Find out more in this month’s Data Dump.

Last week, market reactions indicated disappointment over the PBoC’s decision to keep the one-year MLF unchanged and remarks by the premier that suggested that China is unlikely to roll out a substantial stimulus package. We believe that the market may have misinterpreted recent monetary and fiscal policy signals coming out of policy meetings late last year, including the Politburo meeting and the Central Economic Work Conference. Our analysis has indicated that policymakers have adopted a more hawkish, rather than dovish, tone in their recent communication, as discussed in QuickScan: Politburo Update December 2023 and DeepDive: Key Messages from the PBoC’s Monetary Policy Outlook. We maintain our view that this stance is unlikely to change, unless there is a significant deterioration in the data. One significant area of concern remains the property sector.