China’s real estate situation worsens and factory production disappoints

He The collapse of the Chinese real estate market intensified in May and prompted renewed calls for the government to inject liquidity and credit into the economy, while industrial production, which was supporting growth, fell short of forecasts.

Among a series of data released Monday, analysts focused on bad news from the housing market, which has become the biggest drag on economic growth in China. The decline in real estate investment and house prices accelerated last month.

According to the Ministry of Industry and Trade, industrial production increased by 5.6% compared to the previous year. National Statistics Officewhat does it mean slowdown compared to April and does not correspond to the average forecast from the survey Bloomberg. Retail sales were slightly more encouraging than expected, but Chinese shoppers are still a long way from regaining their pre-pandemic dynamism.

Most economists say the numbers point to a still weak economic recovery, which will likely require more economic action. Beijing to strengthen consumer demand and correct imbalances if we are to achieve the 5% growth target this year. This may lead to increase in government spending and in greater central bank efforts to rein in real estate markets and keep credit flowing.

Most disappointing

“The most disappointing thing about the May data is probably that property sales showed little improvement, even after so much support.“he declared Jacqueline Ronghead economist China from BNP Paribas S.A.. In his opinion, the Chinese authorities need to find a way to reduce rates on existing mortgages, reducing the gap with the cost of new ones.

He People’s Bank of China On Monday, the official interest rate remained unchanged for the tenth month in a row. Economists say the bank’s ability to cut rates is limited by the need to strengthen the yuan, which faces downward pressure as US Federal Reserve reinforces your high-stakes message for a long time.

Chinese stocks fell and the index CSI 300 closed down 0.2%. A gauge of Chinese property developer shares fell 3.2% at 3:08 p.m. local time.

Global fixed-asset investment rose 4% in the January-May period, up from 4.2% in the first four months, despite a rebound in government debt issuance to finance infrastructure spending.

Height China remains”very uneven: exports and new energy-related capital expenditures are the drivers, while consumption and real estate are the brakes“, according to economists, including Larry Hufrom Macquarie Capital Ltd.”The slowdown is not severe enough to jeopardize the growth target” However, the slowdown is not severe enough to jeopardize the economic growth target, and while policymakers may take some limited action, “there is little urgency for major stimulus.”

Consumption is recovering

The acceleration in retail sales was the first since November. The figure is 3.7%, still less than half the 8% recorded before the pandemic, although social and economic life has largely returned to normal.

In accordance with Michelle Lameconomist Greater China from Societe Generale SA, these gains may not last. “It remains to be seen whether the improvement in retail sales performance is sustainable.“, he claimed.

Since households are reluctant to spend money, China opted for export-oriented growth. A factory boom helped offset a slump in the real estate market and support economic growth. But the strategy faces growing uncertainty as major partners erect new trade barriers that threaten the export engine. Last week European Union followed the US lead and imposed high tariffs on Chinese electric cars.

Some analysts aren’t too concerned about the implications. In accordance with Rongfrom BNPSupplies of Chinese electric vehicles to the EU account for only 0.4% of the country’s total exports, and the selling price is Europe much higher than the domestic market, meaning car manufacturers will be able to absorb these fees. Rong Tariffs are expected to reduce Chinese export growth by just 0.1 percentage point this year.

To strengthen domestic demand, China In April, the company launched a program to encourage companies and households to upgrade their old equipment. Part of the plan includes government subsidies for new car buyers.

Monday’s data showed the impact was limited. Retail car sales fell 4.4% in May compared to the previous year, which represents a slight improvement over the previous month.

Home Rescue

At the end of last month, China He also unveiled a sweeping rescue package to support home sales at a time when the credit crunch has hit some of the country’s biggest developers. He relaxed mortgage rules and encouraged local governments to buy up unsold homes. Many investors and analysts warn that financial stimulus is not enough. and that testing programs in several cities have shown that progress may be slow.

Weak domestic demand and deteriorating foreign trade are weighing on business confidence, discouraging companies from investing and forcing some to move production overseas. Credit growth was mediocre and the money supply indicator M1 In May it fell at the fastest pace recorded since 1996.

In a survey conducted UBS Group AG surveying more than 400 senior executives for about a month through mid-May, companies reported weaker outlooks for orders, revenue and margins compared with the same period in 2023. The proportion of respondents decreased. They plan to increase capital spending in the second half of this year.

“We still need new incentives“, he claimed Helen Qiaohead economist Greater China from Bank of America Global Researchin an interview Bloomberg TV. “Otherwise, economic growth rates could weaken significantly.“

(C) Bloomberg.-