ANZ Greater China Weekly Insight 2 July 2013

7/28/2019 ANZ Greater China Weekly Insight 2 July 2013

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Greater China Weekly Insight / 2 Jul 2013 / 2 of 14

FEATURE NOTE

HOW BIG IS THE SECOND ROUND IMPACT OF CHINAS INTER-BANK CREDIT SQUEEZE?

The continuous and severe liquidity squeeze in Chinas inter-bank markets has concerned many that the countryis likely to experience a fast de-leveraging process in its financial system. As a result, the real economy willcontinue to suffer.

PBoC Governor Zhou acknowledged over the weekend that the market has basically understood the PBoCshandling of liquidity. He said banks had great interest to extend loans in early-June but this was not in line withChinas monetary policy, and banks need to adjust. This is the first time that Chinas central bank has admittedthat the aim of the liquidity tightness is to slow the expansion of the commercial banks balance sheets,indicating that a de-leveraging could be inevitable.

In our view, if the central bank continues to maintain the relatively tight liquidity conditions without any signalof a policy easing to reflect the rapidly deteriorating internal and external environment, the de-leveragingprocess in the financial institutions will mean that credit extended to the real economy will fall in the next 1-2quarters, which will further weaken the already sluggish economy. In this note, we investigate the second-round

impact of Chinas inter-bank credit squeeze and its implications for the overall economy and some sectors thatare likely affected the most in the aftermath of the inter-bank turmoil.

IMPACT ON THE BOND MARKET

We start from the financial markets first. Most Chinese banks now hold large amount of bonds as a part of theirliquid asset holding. Chinas bond outstanding reached RMB26trn at the end of 2012, equivalent to 25% of Chinas banking assets. Nearly 90% of Chinas bond transactions take place in the inter-bank market. In thepast few years, Chinas bond market transaction picked up steadily, rising by 17.5% from 2010 to 2012. Moreimportantly, inter-bank bond repurchase surged by more than 60% from 2010 and 2012, suggesting that bondsare used as an important liquidity management instrument.

China - Interbank Transactions

(RMB bn)

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000160,000

In te rbank Repo In te rbank Lending In te rbank Bonds2010 2011 2012

61.8%

67.4%

17.5%

Sources: PBoC, ANZ

This means that a surge in Chinas inter-bank rates will quickly transit in the bond markets. If under thepressure of a liquidity squeeze, those banks facing a cash crunch will have to reduce their bond holdings.Furthermore, because bond trading is also financed by short-tenor inter-bank repo (overnight and 7-day repos),a surge in repo rates will result in a negative carry, and thereby drive up bond yields as well. Indeed, we believea fast rising government bond yield over the past few months is a reflection of the inter-bank credit squeeze,leading the yield curve to be inverted.


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FEATURE NOTE

China - Government Bond Yields

2.0

2.5

3.0

3.5

4.0

4.5

Sep 11 Jan 12 May 12 Sep 12 Jan 13 May 13

1-year 3-year 5-year 7-year 10-year

Sources: PBoC, ANZ

If the liquidity tightness continues, we will likely see the following sequential developments in Chinas bond andcredit markets. We believe financial institutions will likely sell government bonds as they are the most liquidasset, followed by the sale of credit bonds such as corporate bonds and chengtou bonds if the overall liquidityenvironment stabilizes somewhat. This means that government bond yields will rise and the appetite forcorporate and chengtou bonds will dry up. Indeed corporates, and particularly local governments, will face moredifficulty in issuing bonds. If there is a freeze in the chengtou bond markets, some local governments will likelyface difficulty in paying back their loans to the banking system, issued during the GFC period. This could lead torising non-performing loans in the banking system. Meanwhile, commercial banks will find it difficult to sell low-rated bonds, but have to increase provisions to cover the mark-to-market losses and prepare for possibledefault.

While the above described sequential events that may not be realized, we believe policymakers will need to beaware of these spillover effects. In the past few weeks, at least 15 bond issuances have been cancelled, which islikely to dampen market confidence.

IMPACT ON THE BANK LENDING

It is reported that some Chinese commercial banks have suspended new loans extension amid the liquiditycrunch. There does not seem to be a clear pass-through effect from the inter-bank borrowing rates to the loanrates, largely owing to Chinas interest rate controls. However, past experience suggests that the actual lendingrates tend to be higher while the inter-bank offered rates saw increased volatilities, and vice versa. Thissuggests that this round of liquidity tightness will not help increase loans to the real economy, and we will likelysee higher lending rates for corporates, as overall credit conditions become tighter.

China - Inter-bank Borrowing Rates vs LoanLending Rates

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

2009 2009 2010 2010 2011 2011 2012 2012 2013

0

2

4

6

8

10

12

14

Banks' Lending Rates (Weighted Average)Inter-bank Overnight Repo Rates (RHS)

Sources: PBoC, ANZ

In our view, the lending activities and behavior are different between big banks and the small and medium ones.For the big banks, as they have strong branch networks and hold large deposits, they may still want to offer


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FEATURE NOTE

loans to corporates, albeit at a higher price. For the small and medium banks, especially those adopting a FTP(fund transfer pricing) system, they may have to stop lending to avoid incurring losses. In most cases, the FTP

is priced according to market interest rates, normally SHIBOR and bond yields. As the yield curve has beeninverted, the commercial banks will not be able to make money in long-tenor loan extension. We believe mostforeign banks will become more cautious in lending if the inverted yield curve does not disappear soon.

Commercial banks profit margin will be squeezed as a result, as overall funding costs are likely to be higher.For the big banks, the margin squeezing could be offset by higher lending rates. However, for the medium andsmall banks, the profits will likely decline significantly due to an inverted yield curve.

IMPACT ON THE INTER-BANK BUSINESS

It is widely believed that this round of liquidity tightness is conducted by the PBoC with the aim to curb theinter-bank business which has flourished in the past few years. In fact, the inter-bank business has developedrapidly as these businesses require less capital and face relative looser regulations. As Chinese banks need tocomply with strict loan-to-deposit ratios and are under capital tightness pressure, many banks turn to inter-

bank business (not need to comply with loan-to-deposit ratio) to improve the profitability. At present, inter-bank business refers to inter-bank borrowing/lending, bonds, bankers acceptance draft (BAD), letters of credit(LC), etc. While banks are taking on inter-bank credit exposure in conducting the inter-bank business, webelieve that corporates and local governments (via chengtou bonds) are actually the end users of the funding.

The chart below shows that Chinas medium and small banks have borrowed intensively from the inter-bankmarket in the past few quarters, suggesting that they will have to reduce such business in the coming quarters.As these businesses need to be financed by inter-bank borrowing and are very price sensitive, a liquidity crunchwill sharply cut the scale of such business.

China - Net Borrowing from Financial Institutions(RMB trn)

-2

-1

0

1

2

3

4

2010 2011 2012 2013

Medium and Small Banks Big-four Banks Joint-stock Banks

Sources: WIND, ANZ

In our view, the de-leveraging will take about 1-2 quarters, as the inter-bank businesses are normallyconducted with one year tenor. Meanwhile, in order to finance the existing business, some commercial bankswill have to issue high-yielding wealth management products (WMPs) to diversify the funding structure.

IMPLICATIONS FOR THE REAL ECONOMY

The tight inter-bank credit conditions will start to affect the real sectors of the economy in the coming months:First, we expect funding costs for the property developers and local government financing vehicles (LGFV) torise further as they will find it difficult to roll over funds. Official data suggest that Chinas local governmentdebt outstanding remains above RMB10trn, which means that even 10bps rise of the funding cost will bringabout RMB10bn in additional interest payments.

Second, small and medium-sized enterprises (SMEs) will likely suffer amid the liquidity crunch. Past experience

suggests that the banks normally reduce the exposure to SMEs when the credit appetite eases. Given many of them are in the export sector, these sectors will experience double whammy effect from both rising credit costsand the strong RMB.

Third, the issuance of the WMPs will still be sizable in the foreseeable future as banks have to compete for fundsamid the liquidity tightness. However, if the WMPs scale back as the commercial banks lower the leverage ratio,


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FEATURE NOTE

the medium and small banks lending capacity will also be constrained. As the medium and small banks mainlyserve the SME sector, the SMEs will be further affected.

The challenge for the PBoC is to walk the tightrope between market discipline and over-tightening. If liquidity istoo tightly rationed, banks may need to deleverage and will be unwilling to offer funds into inter-bank markets,exacerbating already sparse liquidity conditions. In this case, while the central bank emphasized that it willdefinitely prevent the systemic crisis from taking place via a series of instruments, this risk would remain if thePBoC cannot strike the correct balance between disciplining the banks and maintaining market stability.

Li-Gang Liu, Hao Zhou


6/14


DATA PREVIEW

CHINA DATA PREVIEW

We expect Chinas CPI inflation to rebound to 2.6% y/y in June, from 2.1% in May, mostly due to baseeffects. Meanwhile, the PPI inflation is likely to remain soft, at -2.4%, reflecting weakness in the corporatesector. Overall, Chinas inflationary pressures remain tepid.

GREATER CHINA ECONOMIC DATA CALENDAR

DATE COUNTRY DATA/EVENT PERIOD MARKET LASTTIME

(HK/SG)02 Jul Hong Kong Retail Sales - Value (y/y) May 21.2% 20.7% 16:30

02 Jul Hong Kong Retail Sales - Volume (y/y) May 15.6% 19.4% 16:30

03 Jul China Non-manufacturing PMI Jun -- 54.3 9:00

03 Jul China HSBC Services PMI Jun -- 51.2 9:45

04 Jul Hong Kong PMI Jun -- 49.8 10:30

05 Jul Taiwan CPI (y/y) Jun 0.60% 0.74% 8:30

05 Jul Taiwan WPI (y/y) Jun -- -3.28% 8:30

05 Jul Taiwan Foreign Reserves (USD) Jun -- 406.62bn 16:20

05 Jul Hong Kong Foreign Reserves (USD) Jun -- 305.7bn 16:20

08 Jul Taiwan Trade Balance (USD) Jun -- 4.46bn 16:00

08 Jul Taiwan Exports (y/y) Jun -- 0.9% 16:00

08 Jul Taiwan Imports (y/y) Jun -- -8.0% 16:00

09 Jul China CPI (y/y) Jun -- 2.1% 9:30

09 Jul China Producer Price Index (y/y) Jun -- -2.9% 9:30

Source: Bloomberg


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WEEK IN REVIEW

TAIWAN HOLDS INTEREST RATE AS EXPECTED

Taiwans central bank (CBC) held the policy rate at 1.875% in June as widely expected. Low inflation andsluggish growth continue to prompt the CBC to remain accommodative as the current interest rate level hasbeen considered appropriate. Furthermore, the central bank is also watching closely the highly uncertainfinancial markets. The changing monetary policy stance of major economies is also on the radar. Against thisglobal backdrop, we believe the CBC will continue to act prudentially and maintain a stable monetary policystance.

It is noteworthy that Taiwans bond yield has risen sharply on the back of rising US Treasury yields. Giventhe tapering bias of US monetary policy going forward, Taiwans interest rates will also be subject to anupward bias. As the Bank of Koreas Governor CS Kim noted, emerging markets may be forced to tightenmonetary policy to fight against capital outflows and associated exchange market pressure stemming fromthe rise in the global interest rate. Our forecast has been for Taiwan to lift interest rates at the December2013 board meeting at the earliest.

On the exchange rate front, we believe that the CBC may share the concern regarding capital outflows butto a lesser extent than Korea as it could naturally help devalue the currency strength in view of its exportcompetitiveness. The Taiwan market has seen capital outflows in recent trading days. On the other hand,the recent revision (reduction) of securities gains tax law will motivate foreign investors to look at Taiwansequity market, limiting the chance of massive capital outflows. Given this market condition, we believe thecentral bank will continue its policy towards the currency market, aiming to maintain an orderly movement of the TWD exchange rate.

Raymond Yeung

WEEK IN REVIEW

DATE COUNTRY DATA/EVENT PERIOD MARKET ACTUAL LAST25 Jun Hong Kong Exports (y/y) May 3.4% -1.0% 9.0%

25 Jun Hong Kong Imports (y/y) May 3.5% 1.7% 7.7%

25 Jun Hong Kong Trade Balance (HKD) May -38.0bn -44.3bn -42.7bn

27 Jun China Industrial Profits YTD (y/y) May -- 12.3% 11.4%

27 Jun Taiwan Coincident Index (m/m) May -- 0.20% -0.20%

27 Jun Taiwan Leading Index (m/m) May -- 0.70% 0.40%

27 Jun Taiwan Benchmark Interest Rate 27-Jun 1.88% 1.88% 1.88%

28 Jun Taiwan Bounced Check Ratio May -- 0.18% 0.18%

28 Jun Hong Kong Govt Mthly Budget Surp/Def (HKD) May -- -7.8bn 13.4bn

28 Jun Hong Kong Money Supply M1 - in HKD (y/y) May -- 18.90% 15.50%



28-30 Jun China Leading Index May -- 99.6 99.8

01 Jul China Manufacturing PMI Jun 50.1 50.1 50.8

01 Jul China HSBC Manufacturing PMI Jun 48.3 48.2 49.2

01 Jul Taiwan HSBC Manufacturing PMI Jun -- 49.5 47.1

Source: Bloomberg


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CHINA ONSHORE MARKET LIQUIDITY REPORT

China - PBoC Weekly Open Market Operations(RMB bn)

-200

-150-100

-50

050

100150

200250

25Feb

11Mar

25Mar

08Apr

22Apr

06May

20May

03Jun

17Jun

CB Bill Matured Repo Matured Reverse RepoCB Bill Repo Rev. Repo MaturedNet

Liquidity Injection

Liquidity Withdrawal

China - Weekly Maturing Repo and CB Bills(RMB bn)

020

4060

80

100

120

140

160

180

1Jul

8Jul

15Jul

22Jul

29Jul

5Aug

12Aug

19Aug

26Aug

2Sep

9Sep

16Sep

23Sep

30Sep

CB Bill Matured Repo Matured

China - 7-day Repo Rate

0

2

4

6

8

10

12

Jun11

Aug11

Oct11

Dec11

Feb12

Apr12

Jun12

Aug12

Oct12

Dec12

Feb13

Apr13

Jun13

China - SHIBOR Fixing

0

2

4

6

8

10

12

Jun11

Aug11

Oct11

Dec11

Feb12

Apr12

Jun12

Aug12

Oct12

Dec12

Feb13

Apr13

Jun13

1-month 3-month 6-month

Sources: Bloomberg, CEIC, ANZ

FUNDING COSTS ARE UNLIKELY TO RETURN TO NORMAL LEVELS VERY SOON

The PBoC didnt conduct any open market operations last week, while the matured funds were RMB25bn for theweek. Meanwhile, the liquidity tightness has started to ease after PBoCs statement and designated liquidityinjection over the past few trading days, while the overnight and 7-day repo rates stayed high. These suggestthat the market is still functioning, but that funding costs are unlikely to return to normal levels very soon.

PBOC FINE-TUNES ITS TONE TO EASE LIQUIDITY CONDITIONS

PBoC has fine-tuned its tone to ease liquidity conditions, and released a statement on its website last Tuesdayevening talking about recent market liquidity tightness. The major points were as follows:

The overall liquidity conditions are relaxed, and the commercial banks are holding RMB1.5trn excessreserves with the central bank as of 21 June, compared with normal level of RMB1.0trn;

The PBoC admitted that it has already provided liquidity to some financial institutions over the past fewdays, indicating that the central bank could have already used the short-term liquidity operations (SLO)which was introduced in January, for the first time, to ease the market liquidity tightness;

The PBoC will continue to use a few instruments including SLO to support financial institutions, and itexpects that market liquidity conditions will gradually ease;

Big banks should help stabilise the market and report any important and urgent issues to the centralbank in a timely manner;

The banks should reasonably arrange their assets and liabilities, and the central bank will give liquiditysupport if there is a temporary liquidity shortage;

The SHIBOR price quotation contributors should honour their offering prices, and market makers mustnot mislead the market via fake deals.


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CHINA ONSHORE MARKET LIQUIDITY REPORT

CHINAS LIQUIDITY TIGHTNESS PUSHED UP OFFSHORE RATES AS WELL

Chinese banks raise offshore RMB (CNH) interest rates in Hong Kong to absorb cash amid the onshore liquiditysqueeze. Some banks are raising the 1-month CNH deposit rates so that exporters will convert their FX assetsinto RMB, and then repatriate back onshore through Hong Kongs RMB clearing bank. The onshore and offshoreinterest rate differential can be as high as 4%, Sina News reported citing unidentified sources. Meanwhile, theyields on the Ministry of Finances (MoF) dim sum bonds in Hong Kong were sharply higher than last year due tothe liquidity crunch onshore. The MoF sold RMB10bn worth of RMB-denominated bonds in Hong Kong last week,with yields ranging from 2.87% to 3.6%, all higher than last years levels.

Li-Gang Liu, Hao Zhou


10/14


MOMENTUM BAROMETER

WEEKLY MOMENTUM

Chinas industrial profits rose to 15.5% y/y in May, from 9.3 in April. However, this is mainly due tobase effects. The manufacturing sector remains weak as indicated by the latest official PMI figure,

which declined to 50.1 in June, from 50.8 in May. Meanwhile, in Hong Kong, trade growth slumpeddue to the crack down by Chinese authorises on false trade activities.

In the onshore market, market interest rates eased significantly following the PBoCs statement onTuesday, pledging to ease market liquidity tightness through its liquidity operations. In Taiwan,government bond yields continued to rise on the back of US tapering expectations.

REAL ACTIVITY MOMENTUM

Chinas official PMI fell significantly

The official Purchasing Managers Index (PMI) fellsignificantly to 50.1, from 50.8 in May. While in linewith market expectations, manufacturing activity

remains lukewarm, bordering between contractionand expansion. In addition, the magnitude of the PMIdrop has shown that Chinas overall economic activityhas decelerated further.

Notably, the new export order sub-index, which wasomitted in the NBSs official release on 1 July but laterreleased, came in at 47.7 in June, much weaker thanthe 49.4 in May.

China - Official Manufacturing PMI

45

47

49

51

53

55

57

59

Jun10

Sep10

Dec10

Mar11

Jun11

Sep11

Dec11

Mar12

Jun12

Sep12

Dec12

Mar13

Jun13

Headline New Orders New Export Orders

Chinas industrial profits rose on base effects

Industrial profits rose 15.5% y/y in May, comparedwith 9.3% in April. However, the gain in profits waslargely due to base effects instead of a real recoveryin the industrial sector.

In the first five months, industrial profits increase12.3% y/y.

China - Industrial Profits(ytd, y/y)

-10

-5

0

5

10

15

20

Jan12

Mar12

May12

Jul12

Sep12

Nov12

Jan13

Mar13

May13

Hong Kongs trade slumped in May due to acrack down of false trade activities

Hong Kongs trade growth declined sharply as theMainland Chinese government tightened regulationsto curb cross-border over invoicing. Exportscontracted by 1.0% y/y in May, down from a 9.0%gain in April, and below the market consensus of a3.4% increase. Imports grew 1.7% y/y, from 7.7%previously, also below market expectations.

Hong Kong - Trade Developments

-50

-40

-30

-20

-10

0

10

2030

40

Nov10

Feb11

May11

Aug11

Nov11

Feb12

May12

Aug12

Nov12

Feb13

May13

Trade Balance, HKD bn Exports, y/y Imports, y/y

Sources: CEIC, ANZ


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MOMENTUM BAROMETER

MARKET MOMENTUM

RMB appreciation expectations have turned

around

The RMB non-deliverable forward (NDF) has returnedto around 6.30, suggesting that markets are nowincreasingly expecting a RMB depreciation. The NDFreached 6.20 in May.

USD/CNY Spot and NDF

6.1

6.2

6.3

6.4

6.5

Jun12

Jul12

Aug12

Sep12

Oct12

Nov12

Dec12

Jan13

Feb13

Mar13

Apr13

May13

Jun13

-4

-3

-2

-1

0

1

2

3

NDF Implied Appreciation, % (RHS) USD/C NY 1y NDF

Chinas inter-bank liquidity squeeze have easedsomewhat

Market interest rates in China eased significantly afterthe PBoCs statement on Tuesday evening. The PBoCadmitted that it has already provided liquidity to somefinancial institutions, indicating that the central bankcould have already used the short-term liquidityoperations (SLO) to ease the market liquiditytightness, and will continue to use a few instrumentsincluding SLO to support financial institutions.

The weighted average 7-day repo rate declined tobelow 6% as of Monday, compared with the peak of over 10% last week.

China - 7- day Repo Rate

0

2

4

6

8

10

12

Jun

11

Aug

11

Oct

11

Dec

11

Feb

12

Apr

12

Jun

12

Aug

12

Oct

12

Dec

12

Feb

13

Apr

13

Jun

13

Taiwans bond yields surged on the back of risingUS treasury

Taiwans bond yield has risen sharply on the back of rising US Treasury yields. The 10-year governmentbond yield reached 1.45% last week.

Given the rising expectation of the US Feb tapering itsquantitative easing, Taiwans interest rates will besubject to upward pressure.

Taiwan - 10 Year Government Bond Yield

1.10

1.15

1.20

1.25

1.30

1.35

1.40

1.45

1.50

Jun12

Jul12

Aug12

Sep12

Oct12

Nov12

Dec12

Jan13

Feb13

Mar13

Apr13

May13

Jun13

Sources: CEIC, Bloomberg, ANZ


12/14


FORECASTS

y/y, unless otherwise notedDec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 2013

Real GDP

China 8.9 8.1 7.6 7.4 7.9 7.7 7.9 7.6Taiwan 1.21 0.59 -0.12 0.73 3.97 1.67 1.89 2.36Hong Kong 3.0 0.7 1.1 1.4 2.5 2.8 2.0 2.5

Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13Consumer Price Index

China 2.5 2.0 3.2 2.1 2.4 2.1 2.8 2.7Taiwan 1.60 1.13 2.96 1.37 1.05 2.05 0.08 -0.10Hong Kong 3.8 3.0 4.4 3.6 4.1 3.9 4.4 3.4

Producer Price IndexChina -1.9 -1.6 -1.6 -1.9 -2.6 -2.9 - -

Unemployment Rate, %Taiwan 4.21 4.20 4.16 4.18 4.19 4.19 4.23 4.28Hong Kong 3.3 3.4 3.4 3.5 3.5 3.4 3.6 3.7

ExportsChina 14.8 25.2 21.8 10.0 14.7 1.0 4.8 12.4Taiwan 8.9 21.6 -15.8 3.2 -1.9 0.9 -1.7 0.9Hong Kong 14.4 17.6 -16.9 11.2 9.0 -1.0 -4.8 -2.2

ImportsChina 6.0 28.8 -15.2 14.1 16.8 -0.3 8.2 8.4Taiwan 1.6 22.2 -8.5 0.2 -8.2 -8.0 -3.8 -8.6Hong Kong 11.9 23.9 -18.3 11.3 7.7 1.7 -5.0 -1.5

Trade BalanceChina, USD bn 31.6 29.1 15.2 -0.8 18.2 20.4 28.3 34.3Taiwan, USD bn 4.11 0.5 0.9 3.2 2.3 4.5 3.0 3.3Hong Kong, HKD bn -48.0 -27.5 -34.0 -49.1 -42.7 -44.3 -41.8 -41.6

PMI and Export OrdersChina Manufacturing PMI 50.6 50.4 50.1 50.9 50.6 50.8 50.2 50.5Taiwan Export Orders 8.51 17.95 -14.47 -6.60 -1.11 -0.40 -1.48 -0.26

Industrial ProductionChina 10.3 - 9.9 8.9 9.3 9.2 9.0 9.2Taiwan 2.10 19.30 -11.17 -3.00 -0.80 0.20 1.12 -0.66

Electricity ProductionChina 7.6 - 3.4 2.1 6.2 4.1 - -

Retail Sales

China 15.2 - 12.3 12.6 12.8 12.9 13.0 13.2Taiwan (Commercial Sales) 1.49 7.80 -6.00 -1.00 1.01 -1.85 1.50 -0.11Hong Kong 9.1 10.5 22.7 9.8 20.7 11.4(f) 7.8 5.4

M1 GrowthChina 6.5 15.3 9.5 11.8 11.9 11.3 - -Taiwan (M1 B) 4.91 4.0 5.7 6.0 5.7 7.0 - -Hong Kong 15.9 20.2 13.6 17.6 15.5 18.9 - -

M2 GrowthChina 13.8 15.9 15.2 15.7 16.1 15.8 15.5 15.4Taiwan 3.67 3.0 3.5 3.8 3.7 4.3 - -Hong Kong 12.1 14.1 8.5 9.2 9.3 11.1 - -

2007 2008 2009 2010 2011 2012 2013Current Account, % of GDP

China 10.1 9.3 4.9 4.0 1.9 2.3 2.6*Taiwan 8.9 6.9 11.4 9.3 8.9 10.5 10.8Hong Kong 13.0 15.0 9.5 6.6 4.8 1.3 2.8

Foreign Reserves, USD bnChina 1,528 1,946 2,399 2,847 3,181 3,312 3,443*Taiwan 270 292 348 382 386 403 407*Hong Kong 153 183 256 269 285 317 306*

Government Fiscal Surplus/Deficit, % of GDPChina 0.2 -0.8 -2.8 -2.5 -1.8 -1.5 2.0Taiwan 0.9 0.9 -2.2 -1.2 -1.1 -2.6 -Hong Kong (FY ending in March) 3.8 7.3 0.1 1.5 4.1 3.8 3.1*

Forecasts2 Jul-13 Sep-13 Dec-13 Mar-14 Jun-14

Foreign Exchange RateUSD/CNY 6.133 6.17 6.20 6.23 6USD/TWD 30.006 - - -USD/HKD 7.756 - - -

Policy Interest RateChina PBOC 1-year Lending Rate 6.00 5.75 5.75 5.75 5.75Taiwan CBC Discount Rate 1.875 1.875 2.000 2.125 2.250

Hong Kong Base Rate 0.50 0.50 0.50 0.50 0.50Shaded cells and column refer to forecast; *Indicates actual released data or YTDSources: CEIC, Bloomberg, ANZ

Forecasts

.25--


13/14

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ANZ Greater China Weekly Insight 2 July 2013

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Transcript of ANZ Greater China Weekly Insight 2 July 2013