Chinese leader Xi Jinping. Lintao Zhang/Getty Images
China is struggling to mount a convincing economic recovery from the pandemic, shaking investor confidence.
In January, authorities took around a dozen measures to stabilize the stock market and support the real estate sector.
However, China’s economic data is not encouraging and investor confidence remains low.
This is a machine translation of an article from our US colleagues at Business Insider. It was automatically translated and checked by an editor.
China is accelerating the pace at which it is trying to turn around its economy. In January alone, the Chinese authorities took around a dozen measures to stabilize the stock market’s decline and support weak demand in the real estate market. This comes from one of “Bloomberg“compiled list.
The measures represent a departure from reservations Beijing had last year about stimulating the debt-laden economy as it seeks to develop sustainably after decades of breakneck growth.
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China’s efforts don’t seem to be having much impact on the economy yet
“Overall, the market is not responding positively to this policy,” Hao told Hong on Wednesday Bloomberg TV. Hao Hong is the chief economist at Grow Investment.
The lack of market confidence was clearly evident in the first month of 2024. The country’s stock markets collapsed massively because investors fled to the front. In order to increase investor confidence, the Chinese central bank on Wednesday the requirements for the amount of cash reserves that banks must hold. The move is expected to inject about $140 billion (128.5 million euros) into the banking system.
Premier minister Li Qiang has ordered authorities to take “more vigorous and effective” measures. This is intended to stabilize the markets and investor confidence, it said in an official statement on Monday. The statement provided no further details.
Separately, China’s securities regulator implicitly ordered some hedge fund managers to limit short selling. That reported “Reuterson Wednesday, citing unnamed sources.
There were also signs of government-led buying in Chinese markets earlier this month. The Chinese stock market had previously lost more than six trillion US dollars (5.5 trillion euros) in three years, as “Bloomberg” reported.
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Investors are cautious
The moves gave Chinese markets some support, but investors remain cautious. The Hang Seng Index in Hong Kong is still in the red for the year to date. So far this year it has lost nine percent and four percent compared to the previous week.
The CSI 300, represents the 300 stocks listed in Shanghai and Shenzhen with the largest market capitalization. It is down around six percent so far this year and down four percent compared to the previous week.
China’s economic data wasn’t exactly rosy either. Official data on Wednesday, manufacturing activity at large and state-owned companies contracted for the fourth consecutive month in January. On the real estate front, major Chinese cities are loosening up Shanghai, Guangzhou and Suzhou Restrictions on home purchases earlier this week to stimulate demand.
A state-funded real estate project in the southern Chinese province of Guangxi also received its first bank loan of 330 million Chinese yuan (around 42.6 million euros). The loan was granted to a “white list” of real estate developers for bank financing, according to the state-run “Securities Times“ reported on Tuesday.
Consumer appetite for real estate is still low
Still, consumer appetite for the real estate market overall appears to be low. On Wednesday, preliminary data from the China Real Estate Information Corp published. They show new home sales fell by almost half in January compared to December. The value of new home sales by the country’s largest real estate companies fell by about a third compared to last year.
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Grow Investment’s Hong told Bloomberg TV that the Chinese government’s measures to support the real estate sector were piecemeal and generated only marginal responses. However, Beijing does not want to take major measures to avoid reinflating the real estate bubble, he added.
Meanwhile, the market cannot rely on Chinese consumers either.
“At this point, Chinese households have taken on so much debt. So asking them to borrow more to buy more properties is a big challenge for them,” explains Hong.
More than a year after coronavirus restrictions were lifted, China’s economy is still trying to stage a convincing recovery. The real estate crisis, deflationary pressures and the demographic crisis are creating significant headwinds.
“China is in the midst of a politically driven economic transformation,” Min Lan Tan told the “Nikkei Asia“. She is head of the Asia Pacific Chief Investment Office at UBS. Min Lan Tan added: “This will be painful and carries significant risks.”
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