Last month, China experienced a deeper-than-expected decline in exports, adding to the challenges of stabilizing its economic recovery. Concurrently, Chinese authorities are attempting to prevent a third property developer from succumbing to default.
To provide more insights on the trade data and the property sector, we turn to Bloomberg’s Charlie Zou, reporting from Shanghai. Good morning, Charlie. From London, could you shed some light on what the October trade data reveals about the state of China’s economy? Interestingly, the import figures can be seen in a somewhat positive light. Yes, it paints a mixed picture. Imports unexpectedly rose last month, marking the first increase in eight months and defying the consensus expectation of a four percent drop.
This was surprisingly positive news for those monitoring China’s economic situation. However, exports declined more sharply than anticipated, emphasizing the impact of weak global demand for Chinese goods. In reality, China’s economy is struggling, and the government is putting great effort into fostering a stronger recovery amidst a slump in housing demand. Furthermore, consumer demand remains weak following three years of COVID-related lockdowns. Recently, the IMF also revised down its GDP growth forecast for China for both this year and next. As I mentioned earlier, the government has implemented significant measures to stimulate growth, including widening the budget deficit and issuing more sovereign bonds to boost infrastructure spending. Moving away from the data, one of the largest Chinese property developers received official support.
Does this suggest a change in the government’s stance toward the entire property sector, or is that too optimistic? Drawing conclusions in this regard is challenging. Key differences exist between this developer and other privately controlled companies like Evergrande and Country Garden.
The supported developer, China Vanke, has a major shareholder, Centro Metro State Steel Company. A few days ago, the state-owned local steel asset manager in Shenzhen announced that they have enough cash to assist the developer, and the major shareholder stated that he has no plans to reduce his stake.
Consequently, investor confidence in the state backing resulted in a significant rise in the company’s shares and bonds. In contrast, private companies like Evergrande and Country Garden face considerable uncertainties, such as debt restructuring, potential liquidation of their dollar bonds, and depressed stock prices trading at cents on the dollar. This reflects a lack of investor confidence in the future of the entire sector. It is evident that the Chinese government is aiming to avoid excessive reliance on the property industry for growth, instead focusing on boosting the manufacturing sector, particularly high-end manufacturing and technology. Charlie, thank you for your insights..