China: There are clear signs of economic recovery in the short term
2023-10-19
■ China's main economic indicators in September continued to be stable after August, and the economy has bottomed out and rebounded significantly
■ The fundamental solution to structural problems has not yet come, but through additional policy support, the economy will remain stable in the short term
Today, China's main economic Indicator data are released, and the economic data as of September are basically complete. Real GDP growth from July to September (4.9% year-on-year and 1.3% month-on-month) slowed year-on-year as the base effect of urban lockdowns weakened in the same period last year, but month-on-month growth accelerated from the April-June quarter. After economic activity stalled in July, policy support has allowed the economy to gradually pick up. Monthly indicators for September showed that growth in fixed asset investment (excluding rural areas, up 3.1% year-on-year) slowed, but mining industry output (up 4.5% year-on-year) maintained a similar growth rate to August, demonstrating the strength of domestic demand. Both retail sales (up 5.5% year-on-year) and services production index (up 6.9% year-on-year) increased. Trade statistics show that exports (down 6.2% year-on-year) and imports (down 6.2% year-on-year) also slowed down their decline after August.
Among real estate-related statistics, the declines in real estate development investment (down 9.1% year-on-year) and real estate sales (in terms of construction area, down 7.5% year-on-year) expanded. Although policy support has been strengthened after August, the real estate market is still adjusting, in sharp contrast to economic activity, and there are no obvious signs of recovery. In addition, in terms of financial statistics, the People's Bank of China has stepped up its financial easing policy, and the growth rate of the money supply's base currency (year-on-year growth of 10.7%) has accelerated sharply. However, the currency circulation in the market (M2, a year-on-year increase of 10.3%) has slowed down for seven consecutive months, and the scale of social financing (a year-on-year increase of 9.0%) has also maintained a growth rate similar to the previous month. Although commercial banks have been encouraged to relax credit through administrative guidance and other means, while real estate business activities have stagnated, the real estate industry, which is highly dependent on finance and has a large ripple effect on related industries, has not shown clear effects.
Taken together, the deterioration of many indicators has been contained. Although the economic downturn continues, there are obvious signs of bottoming out and rebounding. In addition to policy support, cyclical adjustments in global manufacturing activity have also provided support for China's exports and production to bottom out. However, the continued sluggish real estate market and the relatively slow recovery of domestic demand, such as retail sales and fixed asset investment, remain problems. In this context, there are reports that the Chinese government is considering revising its annual budget, which increases the possibility of intensifying economic stimulus policies. The economy is expected to remain stable, but solutions to structural problems such as excess debt are yet to come, making it difficult to continue maintaining the growth target of "around 5%."
■ The fundamental solution to structural problems has not yet come, but through additional policy support, the economy will remain stable in the short term
Today, China's main economic Indicator data are released, and the economic data as of September are basically complete. Real GDP growth from July to September (4.9% year-on-year and 1.3% month-on-month) slowed year-on-year as the base effect of urban lockdowns weakened in the same period last year, but month-on-month growth accelerated from the April-June quarter. After economic activity stalled in July, policy support has allowed the economy to gradually pick up. Monthly indicators for September showed that growth in fixed asset investment (excluding rural areas, up 3.1% year-on-year) slowed, but mining industry output (up 4.5% year-on-year) maintained a similar growth rate to August, demonstrating the strength of domestic demand. Both retail sales (up 5.5% year-on-year) and services production index (up 6.9% year-on-year) increased. Trade statistics show that exports (down 6.2% year-on-year) and imports (down 6.2% year-on-year) also slowed down their decline after August.
Among real estate-related statistics, the declines in real estate development investment (down 9.1% year-on-year) and real estate sales (in terms of construction area, down 7.5% year-on-year) expanded. Although policy support has been strengthened after August, the real estate market is still adjusting, in sharp contrast to economic activity, and there are no obvious signs of recovery. In addition, in terms of financial statistics, the People's Bank of China has stepped up its financial easing policy, and the growth rate of the money supply's base currency (year-on-year growth of 10.7%) has accelerated sharply. However, the currency circulation in the market (M2, a year-on-year increase of 10.3%) has slowed down for seven consecutive months, and the scale of social financing (a year-on-year increase of 9.0%) has also maintained a growth rate similar to the previous month. Although commercial banks have been encouraged to relax credit through administrative guidance and other means, while real estate business activities have stagnated, the real estate industry, which is highly dependent on finance and has a large ripple effect on related industries, has not shown clear effects.
Taken together, the deterioration of many indicators has been contained. Although the economic downturn continues, there are obvious signs of bottoming out and rebounding. In addition to policy support, cyclical adjustments in global manufacturing activity have also provided support for China's exports and production to bottom out. However, the continued sluggish real estate market and the relatively slow recovery of domestic demand, such as retail sales and fixed asset investment, remain problems. In this context, there are reports that the Chinese government is considering revising its annual budget, which increases the possibility of intensifying economic stimulus policies. The economy is expected to remain stable, but solutions to structural problems such as excess debt are yet to come, making it difficult to continue maintaining the growth target of "around 5%."