Long-term RMB trend remains stable

CHINA - Report 28 Mar 2022 by FAN Gang and Chunyang Wang

Economic recovery has been relatively strong, thanks largely to export and fiscal policy support. In January-February, industrial output rose 7.5% y/y, up 3.2 pps from December 2021. Investment was up 12.2% y/y, up 7.3 pps from 2021. Real estate investment increased 3.7%, having stopped its previous trend of rapid fall. Exports rose 16.3% y/y, up 1.2 pps from January-February 2021, reaching their second highest level since 2019.

In February, the overall PMI index, manufacturing PMI and non-manufacturing business activity index were 51.2%, 50.2%, and 51.6%, consistently in the improving zone, and up 0.2, 0.1, and 0.5 pps from January, indicating that the economy is generally expanding.

In January-February, retail sales of social consumption goods were up 6.7%, up 5 pps from last December. The overall price level grew slowly, leaving a great deal of room for any future money expansion. CPI rose 0.9% y/y, the same rate as in January, and December 2021. CPI after taking out food and energy prices rose 1.1% y/y, down 0.1 pps from January. Monetary policy is also stable. M2 increased 9.2% y/y at the end of February, 0.6 pps lower than January. M1 rose 4.7% y/y.

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