China: Policy support drives a slight recovery in economic activity
2024-10-25
■ Most of the major economic indicators in September showed that the growth momentum has strengthened, and policy support has driven the recovery of economic activities
■ Government departments need to support the economy in both flow and stock, and the scale of economic stimulus measures has not yet been determined
China released the major economic indicators for July-September and September before the 18th of last week. Although the real GDP growth rate in July-September (4.6% year-on-year and 0.9% month-on-month) did not reach the 5% target for two consecutive quarters, the month-on-month growth rate accelerated, which was higher than that in April-June. The economy regained momentum thanks to the Chinese government's consumption promotion policies and equipment renewal incentive policies.
Economic indicators in September showed that the growth rates of industrial added value (5.4% year-on-year), total retail sales of consumer goods (3.2% year-on-year), and service industry production index (5.1% year-on-year) accelerated. The slowdown in fixed asset investment (excluding rural areas, 3.4% year-on-year) also eased. The accelerated month-on-month growth rates of industrial added value, total retail sales of consumer goods, and fixed asset investment indicate that economic activities have increased. However, the consumer price index (up 0.4% year-on-year) remained below 1%, reflecting that the sluggish demand has not been eliminated. In addition, based on the breakdown of the total retail sales of consumer goods, sales of communication equipment such as smartphones, household appliances, and audio-visual equipment promoted by the government have increased significantly. Still, sales of luxury goods, such as cosmetics and jewellery, and resource and raw materials, such as petroleum products and building decoration materials, have declined, indicating consumers are more cautious in their consumption attitude.
In the real estate data for September, although the decline in real estate development investment (down 10.1% year-on-year since the beginning of the year) and real estate sales (down 17.1% year-on-year in terms of floor area since the start of the year) was large, the downward trend has slowed down. On the other hand, the decline in housing prices in 70 large and medium-sized cities (according to Reuters calculations, new housing prices fell 5.8% year-on-year, and second-hand housing prices fell 9.1% year-on-year) continued to expand. Although the Chinese government and the People's Bank of China (PBOC) have strengthened their support for the real estate market, including relaxing mortgage restrictions, repurchasing inventory housing and converting it to affordable housing, and promoting financing for high-quality real estate developers, the downward trend in transaction volume has slowed down. However, there is still no sign of improvement in housing price adjustment.
To curb the adjustment of the real estate and capital markets and the slowdown of economic activities, the government announced a package of monetary stimulus measures but has not yet specified its size. The adjustment of the real estate market is inseparable from the high debt problem of the private sector and local governments, so the government needs to make up for the lack of demand in the private sector in terms of flow and promote the transfer of debts of the private sector and local governments in terms of stock. This situation, which is different from ordinary economic stimulus measures, reflects the complexity and deep-rootedness of the problem of insufficient demand and also shows that the recovery of China's economy will be a medium- to long-term process.
■ Government departments need to support the economy in both flow and stock, and the scale of economic stimulus measures has not yet been determined
China released the major economic indicators for July-September and September before the 18th of last week. Although the real GDP growth rate in July-September (4.6% year-on-year and 0.9% month-on-month) did not reach the 5% target for two consecutive quarters, the month-on-month growth rate accelerated, which was higher than that in April-June. The economy regained momentum thanks to the Chinese government's consumption promotion policies and equipment renewal incentive policies.
Economic indicators in September showed that the growth rates of industrial added value (5.4% year-on-year), total retail sales of consumer goods (3.2% year-on-year), and service industry production index (5.1% year-on-year) accelerated. The slowdown in fixed asset investment (excluding rural areas, 3.4% year-on-year) also eased. The accelerated month-on-month growth rates of industrial added value, total retail sales of consumer goods, and fixed asset investment indicate that economic activities have increased. However, the consumer price index (up 0.4% year-on-year) remained below 1%, reflecting that the sluggish demand has not been eliminated. In addition, based on the breakdown of the total retail sales of consumer goods, sales of communication equipment such as smartphones, household appliances, and audio-visual equipment promoted by the government have increased significantly. Still, sales of luxury goods, such as cosmetics and jewellery, and resource and raw materials, such as petroleum products and building decoration materials, have declined, indicating consumers are more cautious in their consumption attitude.
In the real estate data for September, although the decline in real estate development investment (down 10.1% year-on-year since the beginning of the year) and real estate sales (down 17.1% year-on-year in terms of floor area since the start of the year) was large, the downward trend has slowed down. On the other hand, the decline in housing prices in 70 large and medium-sized cities (according to Reuters calculations, new housing prices fell 5.8% year-on-year, and second-hand housing prices fell 9.1% year-on-year) continued to expand. Although the Chinese government and the People's Bank of China (PBOC) have strengthened their support for the real estate market, including relaxing mortgage restrictions, repurchasing inventory housing and converting it to affordable housing, and promoting financing for high-quality real estate developers, the downward trend in transaction volume has slowed down. However, there is still no sign of improvement in housing price adjustment.
To curb the adjustment of the real estate and capital markets and the slowdown of economic activities, the government announced a package of monetary stimulus measures but has not yet specified its size. The adjustment of the real estate market is inseparable from the high debt problem of the private sector and local governments, so the government needs to make up for the lack of demand in the private sector in terms of flow and promote the transfer of debts of the private sector and local governments in terms of stock. This situation, which is different from ordinary economic stimulus measures, reflects the complexity and deep-rootedness of the problem of insufficient demand and also shows that the recovery of China's economy will be a medium- to long-term process.