The Chinese economy… signs of improvement and faltering at the same time
Some economic indicators in China recorded an increase during the past month, while others witnessed stability, at a time when Beijing is witnessing a faltering in its real estate sector, which has raised concerns about a financial crisis that may afflict the second largest economy in the world.
The head of the People’s Bank of China (the central bank), Pan Gongsheng, allayed fears about the country’s economy, and said that there are signs of improvement, pointing to the recovery of the real estate sector as well, after the bankruptcy and default of major companies.
Sheng explained that this recovery enables the control of local government debt risks, pointing out that economic indicators, including industrial production and service activity, have shown positive trends.
During his speech at the annual meetings of the International Monetary Fund in Marrakesh, Morocco, Sheng reported that the real estate market in many Chinese regions showed signs of recovery after the easing of mortgage rules, adding that the debt risks of local governments in China are structural and generally manageable.
He believes that the eastern provinces, which are more economically developed, are able to solve the debt problems of their local governments on their own. As for provinces in the central and western regions, they can restructure their financing platforms, sell assets to pay off debts and negotiate with financial institutions.
The world fears a financial crisis that may hit the second largest economy in the world, given the Chinese economy’s connection to almost every economy in the world, which may represent a new shock to the already fragile global economy.
Therefore, the Chinese economy is always seen as an important and powerful driver of the global economy and its related economies, which gives the financial indicators issued by China momentum among the business community around the world.
According to Sheng, youth employment rates have improved significantly, pointing to the stability of employment in general. China’s fiscal spending also increased at a faster but reasonable pace, while local governments’ issuance of private bonds, a major source of infrastructure financing, rose.
He stressed that the risks threatening global financial stability are rising, as uncertainties related to monetary policy are increasing due to complex trends in major economies.
Financial indicators
Data issued by the China Federation of Logistics and Purchasing showed that the index, which tracks the development of the bulk goods market in China, rose slightly last September, driven by increasing demand in the market.
The data added that the bulk goods index in China recorded 103.6 percent last month, an increase of 0.9 percentage points compared to its counterpart recorded last August.
A reading above 100 indicates expansion and growth, while a reading below 100 reflects contraction.
The union said that the increase highlights the growing market demand, as well as the improved production and business environment. It is expected that China’s bulk commodity market will maintain stable and sound development momentum in October, as policy incentives gradually take effect.
The data also showed that China’s logistics sector witnessed stable performance last September thanks to increasing demand and expectations in the market.
The country’s logistics market performance index reached 53.5 percent last month, an increase of 3.2 percentage points from last August, according to the federation.
The Union’s chief economist, He Hui, attributed this rise to the impact of policy incentives and the gradual recovery of market demand and expectations, adding that the logistics sector is likely to witness a sustainable recovery in the future.
Previous data for the third quarter of this year included some promising numbers that supported the stability of economic activity, with improved factory activity and a moderate decline in exports as Beijing launched a stimulus policy and eased restrictive real estate policies. Releases next week on industrial production, retail sales and unemployment are expected to show how widespread this stabilization is.
According to Xiao Jiaqi, head of research at Credit Agricole CIB, it will be important to monitor activity data coming in September. While the numbers may also send a message that the Chinese economy may be showing more signs of stabilization, uncertainty remains regarding the trajectory of the real estate sector.
On the other hand, there are also still questions about the amount of additional stimulus that China will provide to support the economy. On Monday, the People’s Bank of China will set the interest rate on the one-year medium-term lending facility, a key interest rate. Economists widely expect this to remain unchanged for now, although many expect a cut before the end of 2023.
According to Bloomberg, China is considering increasing its budget deficit this year by issuing more debt to spend on infrastructure. It is also considering forming a state-backed stabilization fund to enhance confidence in the stock market, at a time when the country’s sovereign wealth fund recently bought the equivalent of about $65 million in shares in the country’s largest banks.
Data scheduled for release on Wednesday are likely to show a modest rebound in GDP growth on a quarterly basis, although year-on-year comparisons may be less positive. The pace of expansion in the July-September period may have slowed from a year ago to 4.5 percent, below Beijing’s annual growth target of about 5 percent.
Meanwhile, the Bank of China (BOC) announced that it had succeeded in issuing 1.6 billion yuan (about 222.92 million dollars) of external green bonds denominated in yuan in the external market. According to the bank, the two-year bonds were issued by the bank’s Frankfurt branch, and the funds raised through the bond issue will be used to support green projects.
Futures activity
China’s futures market recorded active trading in terms of transaction volume and value last month, according to the China Futures Association.
Data issued by the association, on Sunday, showed that the total volume of transactions rose last September, an increase of 28.05 percent on an annual basis. It also showed that the value of transactions in the market increased by 19.13 percent on an annual basis to 51.48 trillion yuan (about 7.17 trillion dollars). .
The association said that during the first nine months of the current year, the volume and value of transactions grew by 30.49 percent and 6.13 percent, compared to the period last year, respectively.
2023-10-16 10:55:07
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