2023-09-15 21:05:05
Economic activity in China began to improve in August, with data released on Friday confirming that the growth rate may be stabilizing, although bad news related to the real estate sector still poses some challenges.
According to what was announced by the National Bureau of Statistics (NBS), industrial production, which measures production from sectors such as manufacturing and mining, rose by 4.5% in August compared to the previous year, following a 3.7% increase witnessed in the previous month, and retail sales, which measures consumption, also expanded. , by 4.6% compared to the previous year, but there is more evidence that the two-year-old real estate crisis is not over yet.
Sino Ocean, a major state-backed real estate developer, said it would suspend repayments on its foreign loans, a sign of how the ongoing real estate crisis might continue to impact the economic expansion.
Investment in fixed assets, including infrastructure and construction, grew by 3.2% in the first eight months of this year compared to the same period last year, which is slightly weaker than the 3.4% recorded in the first seven months of 2023.
Real estate investment decreased by 8.8% in the first eight months of the year, compared to the same period last year, according to the same source, and real estate sales by floor area also decreased by 7.1%.
Moody’s lowered its forecast for the real estate sector in general on Thursday, citing a decline in residential sales and continued concerns regarding the health of the industry.
Larry Hu, chief economist for Greater China at Macquarie Group, said that despite “widespread pessimism”, the worst may be over for the world’s second-largest economy, which is currently grappling with weak demand for exports from global markets, and the worst downturn. Real estate at all.
Going forward, headline growth numbers might improve with support from policies and fundamentals, but the pace will be modest, Larry Ho wrote in a research note on Friday. He pointed to weakness in the real estate sector, as well as low confidence among business owners and consumers.
However, Asian stock markets rose following the data was released, with MSCI’s broadest index of regional stocks, up nearly 1% by midday. In Hong Kong, the Hang Seng Index rose by 1.5%, and the Japanese Topix Index rose by 0.8%.
“There is a growing sense of optimism among a group of investors, who believe that Beijing’s recent initiatives to stimulate the economy and stabilize financial markets are showing signs of success,” Stephen Innes, managing partner at SBI Asset Management, wrote in a research note on Friday. However, it is necessary to be cautious, as it is still early, and one month of positive data is not enough to confirm a sustainable path towards recovery.”
China’s economy has been in recession since April, when the momentum from a strong start to the year faded. Since then, the government has taken a series of measures to revive growth.
On Thursday, the People’s Bank of China made a surprise reduction in reserve ratios imposed on banks, aiming to support economic recovery and improve liquidity in the financial system.
The required reserve ratio has been reduced by 25 basis points for all banks as of Friday, except for those that have already implemented a reserve ratio of 5%. The People’s Bank of China last cut reserve requirements for almost all banks by 25 basis points in March.
On Tuesday, Chinese Foreign Ministry spokeswoman Mao Ning commented on suggestions of economic weakness, saying that growth in the Chinese economy is “strong and resilient.”
Ning said, during a press conference, that those comments predicting the collapse of the Chinese economy appear from time to time, “but the only thing that collapses is that rhetoric and not the Chinese economy, which is a major driver of the global economy.”
The CPI rose just 0.1% in August, which was below market expectations, and the Producer Price Index fell 3% year-on-year, falling for the eleventh straight month, as prices in the industrial sector continued to be weak.
The tepid trend in consumer prices in China constitutes a stark contrast to the inflation witnessed by most other major economies, which has forced their central banks to raise interest rates and follow the tightest monetary policies in decades.
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