- China has struggled to make a convincing economic recovery post-pandemic, taking a toll on investor confidence.
- Authorities took about a dozen measures in January to stabilize the stock market crash and support the real estate sector.
- However, China’s economic indicators are not encouraging, and investor confidence remains low.
China is accelerating its economic recovery.
In January alone, Chinese authorities took about a dozen measures to stabilize the stock market’s collapse and support demand in the sluggish real estate market, according to a list compiled by Bloomberg. The moves mark a departure from the reservations Beijing had last year about stimulating its debt-laden economy as it seeks sustainable development after decades of breakneck growth. be.
However, these efforts do not seem to have yielded much results so far.
“Overall, the market is not reacting favorably to these policies,” Hao Hong, chief economist at Grow Investments, told Bloomberg TV on Wednesday.
The lack of market confidence was evident in the first months of 2024, when the country’s economy slumped. Stock market sold off sharply as investors dashed for the exit door.
To increase investor confidence, central bank of china On Wednesday, it lowered requirements for the amount of cash banks must hold in reserves. This is expected to inject approximately $140 billion into the banking system.
Prime Minister Li Qiang The government has instructed authorities to take more “strong and effective” measures to stabilize markets and investor confidence, according to an official statement on Monday. The statement did not provide further details.
Separately, China’s securities regulator has implicitly instructed some hedge fund managers to limit short selling. Reuters It was reported on Wednesday, citing anonymous sources.
There were also signs of state-led buying in Chinese markets at the beginning of the month, after the country’s stock market hemorrhaged more than expected. 6 trillion dollars Within three years, according to Bloomberg.
investors are cautious
The move has helped the Chinese market to some extent, but investors remain cautious.
Hong Kong’s Hang Seng Index has been in the red since the beginning of the year, trading down 9% year-to-date and down 4% from the previous week. Meanwhile, the CSI 300 (which tracks the top 300 listed stocks in Shanghai and Shenzhen by market capitalization) has fallen about 6% since the beginning of the year and 4% from a week ago.
China’s economic indicators are not rosy either. Manufacturing activity among large and state-owned enterprises contracted for the fourth straight month in January, official data on Wednesday showed.
In terms of real estate, major Chinese cities Shanghai, Guangzhou and Suzhou eased restrictions on home purchases earlier this week in a bid to stimulate demand.
A state-run real estate project in southern China’s Guangxi Zhuang Autonomous Region also received the first bank loan (worth 330 million Chinese yuan, or $46 million) given to a “white list” of bank-financed real estate developers, state securities said. The Times reported. on tuesday.
Consumer appetite for real estate remains low
Still, overall consumer appetite for the real estate market appears to be sluggish.
New home sales in January fell by nearly half compared to December, according to preliminary data released by the China Real Estate Information Corporation on Wednesday. Sales of new homes by Japan’s largest real estate company have fallen by about one-third compared to a year ago.
Grow Investment’s Hong told Bloomberg TV that the Chinese government’s efforts to support the real estate sector have been piecemeal and the response has been limited. However, he added that the Chinese government does not want to expand the real estate bubble again, so it is not making it large-scale.
Meanwhile, the market cannot rely on Chinese consumers either.
“Chinese households have so much leverage at the moment, so asking them to borrow more and buy more property is a big ask for them,” Hong said.
The world’s second-largest economy is still trying to build a convincing recovery more than a year after it began lifting restrictions to combat the coronavirus. facing significant headwinds from property crisis, deflation pressure, and Population crisis.
“China is in the midst of a policy-driven economic transformation,” said Ming Lan Tan, chief investment officer for Asia Pacific at UBS, as reported by Nikkei Asia. “So it is painful and carries significant risks,” Tan added.