- China is struggling to stage a convincing economic recovery post pandemic, hitting investor confidence.
- In January, authorities pulled about a dozen moves to stabilize a stock market rout and to support the property sector.
- But China’s economic data isn’t encouraging, and investor confidence is still low.
China is picking up the pace at which it’s trying to turn its economy around.
In January alone, Chinese authorities pulled about a dozen moves to try to stabilize a stock market rout and support downbeat property market demand, according to a list compiled by Bloomberg. Those moves mark a departure from the reservations Beijing had last year about stimulating the debt-laden economy as it seeks to develop sustainably after decades of breakneck growth.
However, those efforts don’t seem to be amounting to much as of yet.
“All in all, the market is not reacting favorably to these policies,” Hao Hong, the chief economist of Grow Investment, told Bloomberg TV on Wednesday.
The lack of market confidence showed up clearly in the first month of 2024, when the country’s stock markets sold down massively as investors made a dash for the exit door.
To boost investor confidence, China’s central bank on Wednesday slashed its requirement for the amount of cash banks need to hold in their reserves — a move that is expected to inject about $140 billion into the banking system.
Premier Li Qiang has instructed authorities to take more “forceful and effective” measures to stabilize the markets and investor confidence, according to an official statement on Monday. The statement did not provide any further details.
Separately, China’s securities regulator implicitly instructed some hedge fund managers to restrict short selling, Reuters reported on Wednesday, citing unnamed sources.
There were also signs of state-led buying in China’s markets earlier in the month after the Chinese stock market bled more than $6 trillion in three years, per Bloomberg.
Investors are cautious
The moves gave some support to Chinese markets, but investors are still cautious.
Hong Kong’s Hang Seng Index is still in the red this year to date, trading 9% lower so far this year and down 4% from a week ago. Meanwhile, the CSI 300 — which tracks 300 Shanghai and Shenzhen-listed stocks with the largest market capitalizations — is about 6% lower so far this year and 4% lower from a week ago.
China’s economic data hasn’t been rosy either. Manufacturing activity of large and state-owned companies contracted for the fourth straight month in January, official data showed on Wednesday.
On the property front, the major Chinese cities of Shanghai, Guangzhou, and Suzhou relaxed home-buying restrictions earlier this week in a bid to boost demand.
A state-backed property project in the south China province of Guangxi also received the first bank loan — worth 330 million Chinese yuan, or $46 million — granted to a “white list” of property developers for bank financing, state-owned Securities Times reported on Tuesday.
Consumer appetite for property is still low
Still, overall consumer appetite for the property market appears to be in the dumps.
Preliminary data from China Real Estate Information Corp released on Wednesday showed January new home sales slumped by nearly half from December. The value of new home sales from the country’s largest real-estate firms dropped by about one-third from a year ago.
Grow Investment’s Hong told Bloomberg TV the Chinese government’s measures to support the real-estate sector were piecemeal and produced marginal responses. But Beijing isn’t going big because it also doesn’t want to reinflate the property bubble, he added.
Meanwhile, the market can’t count on Chinese consumers either.
“At this juncture, Chinese households have leveraged up so much. So if you ask them to borrow more, to buy more property, it’s a big ask for them,” said Hong.
The world’s second-largest economy is still trying to stage a convincing recovery more than a year after it started lifting COVID-19 restrictions. It’s facing significant headwinds from a property crisis, deflationary pressure, and a demographic crisis.
“China is in the midst of a policy-induced economic transition,” said Min Lan Tan, who heads the Asia Pacific chief investment office for UBS, Nikkei Asia reported. “So it’s going to be painful, and it carries with it significant risks,” Tan added.
