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Data showed signs of stabilization in the Chinese economy, and the CSI 300 and Hang Seng index edged higher

2023-09-15
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China's factory output and retail sales accelerated in August, but investment in the battered property sector recorded a sharp decline.

China faces a tough task to revive growth amid persistent weakness in its key property sector, a depreciating currency and weak global demand for its manufactured goods.

Industrial output rose 4.5 per cent in August from a year earlier, according to data released on Friday by the National Bureau of Statistics, accelerating from 3.7 per cent in July and beating expectations of 3.9 per cent growth in a Reuters poll of analysts. The increase was the fastest since April.

Retail sales, a measure of consumption, also rose at a faster pace of 4.6 percent in August, the fastest pace since May, boosted by the summer travel season.

The upbeat data suggest that a series of recent measures to boost the economy are beginning to bear fruit. But analysts say a lasting recovery is far from certain, especially as confidence in the beleaguered housing sector remains low and continues to be a major drag on growth.

Gary Engle, senior economist for Asia Pacific at Natixis, said: "While there are signs of stabilization in manufacturing and related investment, deteriorating real estate investment will continue to weigh on growth. Confidence remains at the root of most problems, and more constructive policy and regulatory changes are needed to boost growth momentum."

Some better-than-expected indicators have given the market a sigh of relief...

The yuan hit a two-week high against the dollar in early trading, while the CSI 300 index rose 0.2 per cent and Hong Kong's Hang Seng Index rose 1 per cent.

Commodity data showed China's primary aluminium production hit a record monthly high in August, while refinery throughput also rose to a record high, further boosting sentiment.

Data showed bank lending figures were better than expected, the decline in imports and exports narrowed and deflationary pressures eased. Private car sales also returned to year-on-year growth in August as greater discounts and tax breaks for electric vehicles boosted consumer confidence.

The move came after the People's Bank of China said it would cut the amount of money banks must hold in reserve for the second time this year to boost liquidity.

But analysts say more fiscal and monetary policy measures are needed as the housing sector boom, high youth unemployment, uncertainty over household consumption and rising Sino-US trade, technology and geopolitical tensions raise the bar for a durable recovery in the near term.

Zhang Zhiwei, chief economist at Pindian Asset Management, said: "Yesterday's RRR cut sends an interesting signal about the sense of urgency to promote growth. More policies to boost overall demand are expected in the coming months."

Real estate is still depressed...

The once-mighty property sector is still a drag on the economy, with the largest private developer, Country Garden, struggling recently due to a liquidity crunch.

The latest industry data offered little comfort to markets and investors. Property investment continued its decline in August, falling 19.1 per cent from a year earlier and 17.8 per cent the previous month, according to calculations from the National Bureau of Statistics.

"We remain hopeful that there will be a small sequential pick-up in home sales in the coming months, but the stimulus measures will ultimately not reflate the sector," said Lewis, China economist at Oxford Economics.

"China may have to launch more aggressive property easing measures to achieve a genuine recovery," said analysts at Nomura Holding.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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