China’s Economy Shows Fresh Weakness in Factories, Housing and Consumer Spending
The latest data heap further pressure on policy makers to revive country’s crumbling growth
By Jason Douglasin Singapore and Cao Li in Hong Kong
Manufacturing activity in China shrank for the sixth consecutive month. PHOTO: CFOTO/ZUMA PRESSChina’s economy limped through August.
A prolonged slump in the real-estate market deepened.
Factories were hit by sinking exports, and consumers kept a tight leash on spending.
A new batch of data on Thursday heaped further pressure on China’s policy makers to do more to revive crumbling growth, with a dizzying mix of targeted measures so far showing little effect.
On Thursday evening, the country’s central bank lowered the minimum down payment for some borrowers, an attempt to spur home buying.
It also said banks can lower the rates they charge on existing mortgages.
But many economists say such piecemeal measures, while helpful, don’t go far enough to restore household and business confidence in an economy beset by painfully high youth unemployment, cratering exports and worsening strains in the property sector.
“Every week there’s something new,” said Carlos Casanova, senior Asia economist at Union Bancaire Privée in Hong Kong.
“But we are not entirely there yet in my opinion.
More needs to happen.”
Manufacturing activity shrank for the fifth consecutive month in August, while services-sector activity slowed again as consumers continued to pare back spending, according to gauges of activity published Thursday by China’s National Bureau of Statistics.
Sales at China’s biggest real-estate developers were down by a third from the same month a year ago, new figures showed.
Thursday’s data extend a long run of downbeat news on the world’s second-largest economy, a spell of weakness that means China can’t be counted on this year to boost a global economy dogged by persistent inflation and feeble growth, particularly in Europe.
Many economists believe China’s present troubles foreshadow a new era of much slower growth.
Beijing wants to rebalance the economy toward consumption and away from real-estate investment.
That would be a difficult shift for any country—but China’s aging population and its deepening rivalry with the U.S. make it even more challenging.
Concerns over China’s economic prospects have intensified after an anticipated boom in consumer spending this year failed to materialize.
The hope was that after dismantling the country’s stringent Covid-19 policies, consumers would propel China’s economy even as a slowing global economy crimped exports and policy makers reined in what they saw as speculative excesses in the real-estate market.
Instead, after a burst of spending in the months immediately after most public-health restrictions were lifted in December, Chinese consumers have trimmed outlays and saved more, reflecting anxiety over jobs, earnings and a weak housing market.
China expanded just 0.8% in the second quarter compared with the first, and many economists now expect China will just about meet the government’s goal of expanding 5% for the year as a whole—and only if more stimulus is forthcoming.
China’s attempts to boost its economy this year have largely focused on making it easier and cheaper for consumers and companies to borrow money.
That continued on Thursday evening, when the central bank lowered the minimum down payment for future mortgages and said it would allow borrowers to renegotiate the payments they make on existing mortgages.
Those cheaper renegotiated rates could discourage Chinese consumers from paying back their mortgages early, freeing up cash they can instead spend in restaurants, shopping malls and elsewhere.
But further support for swooning household and business sentiment is needed, economists said.
“Households will welcome the extra cash, take some encouragement that Beijing is finally being proactive, but will need stronger easing to shake them out of ‘confidence trap’ conditions,” said Rory Green, head of Asia research at GlobalData TS Lombard in London, referring to a situation in which weak confidence and weak spending reinforce each other.
Options for more effective stimulus, say economists, include bigger cuts to interest rates, tax cuts for businesses, or handouts to families to boost spending and activity.
Authorities should also consider helping heavily indebted local governments in China access extra financing, either by increasing borrowing quotas or tapping the central government for funds, economists say.
Officials face some constraints on acting more forcefully, such as a weakening yuan. China’s central bank is wary of letting the yuan fall too far or too fast against the dollar and other major currencies, limiting its room to cut rates, which tends to weaken a currency.
Officials are also leery of handouts and other policies that smack of Western “welfarism,” and don’t want to ignite another runaway real-estate boom.
Economists say such concerns explain why Beijing is eschewing major fiscal or monetary stimulus and instead pursuing a range of smaller steps.
Among the latest moves, the southern business hubs of Guangzhou and Shenzhen relaxed restrictions on first-home purchases, allowing more people to qualify for favorable mortgage terms.
Other Chinese megacities, including Beijing and Shanghai, are widely expected to follow suit.
Also this week, officials cut a tax on stock trading, giving a temporary boost to stock prices.
The official purchasing managers index for manufacturing in China posted a reading of 49.7 in August, below the 50 mark that separates an expansion in activity from a contraction. PHOTO: CFOTO/ZUMA PRESSChina’s top 100 real-estate developers recorded total sales of $47.1 billion in August, according to private data released Thursday by China Real Estate Information Corp., which tracks the industry.
The figure was down 34% from a year ago and was slightly less than July, a month that already marked the lowest monthly total in recent years.
New home sales in China had increased for a few months earlier this year, before reverting back to a deep slump, imperiling the country’s largest surviving property developer, Country Garden Holdings.
The real-estate giant missed interest payments on two bonds earlier this month, and on Wednesday reported a record first-half loss that topped $7 billion.
The worsening property downturn has prompted Chinese regulators and local governments to introduce more incentives for people to purchase homes.
Last week, Chinese regulators broadened the definition of first-time home buyers, to enable more households to purchase homes at smaller down payments and at cheaper mortgage rates.
Several major cities quickly responded by allowing more people to qualify as first-time buyers.
“The current economic situation doesn’t look good.
It is unlikely that people will suddenly start buying houses for no reason,” said Yan Yuejin, research director of Shanghai-based E-house China Research and Development Institution, who believes there is still demand.
“But it takes time to recover confidence and release the demand,” he added.
China’s property woes are in part the result of an attempt by the government to deflate a bubble in the real-estate sector.
On Thursday, the central bank and the main financial regulator repeated the mantra: “Houses are for living in, not for speculation.”
Also Thursday, the official purchasing managers index for manufacturing posted a reading of 49.7 in August, an improvement over the 49.3 registered in July but still below the 50 mark that separates an expansion in activity from a contraction, the statistics bureau said.
A similar index for services declined to 50.5, from 51.5 a month earlier, marking the sixth month in a row of weakening activity.
One brighter spot was construction, where an index of activity rose in August, signaling an expansion in activity as government spending on infrastructure picked up.
Thursday’s data could have been worse, Robert Carnell, head of research for Asia-Pacific at ING said in a note to clients.
But overall, he said, they “[do] not amount to any meaningful improvement to the overall economic backdrop.”
Xiao Xiao in Beijing and Rebecca Feng contributed to this article.
0 comments:
Publicar un comentario