Down Angle Symbol A symbol in the form of an angle pointing downwards. Chinese leader Xi Jinping. Lintao Zhang/Getty Images
- China is struggling to mount a convincing economic recovery after the pandemic, hurting investor confidence.
- In January, authorities took about a dozen measures to stabilize the stock market slump and support the real estate sector.
- But China's economic data is not encouraging and investor confidence is still low.
China is accelerating the pace at which it is trying to get its economy back on track.
Chinese authorities took about a dozen measures in January alone to stabilize the stock market downturn and shore up weak demand in the real estate market, according to a list compiled by Bloomberg. The moves mark a departure from reservations Beijing had last year about boosting its debt-laden economy as the country seeks sustainable development after decades of rapid growth.
However, these efforts don't seem to be having much effect yet.
“Overall, the market is not reacting positively to these measures,” Hao Hong, chief economist at Grow Investment, told Bloomberg TV on Wednesday.
The lack of market confidence was clearly evident in the first month of 2024, when the country's stock markets sold off massively as investors rushed for the exit door.
In a bid to boost investor confidence, China's central bank on Wednesday lowered its requirements for the amount of cash banks must hold in their reserves – a move expected to bring in about $140 billion to the banking system.
Premier Li Qiang has ordered authorities to take “more vigorous and effective” measures to stabilize markets and investor confidence, according to an official statement on Monday. No further details were given in the statement.
Separately, China's securities regulator has quietly ordered some hedge fund managers to limit short selling, Reuters reported on Wednesday, citing unnamed sources.
There were also signs of government buying in Chinese markets earlier this month after the Chinese stock market lost more than $6 trillion in three years, according to Bloomberg.
Investors are cautious
The moves gave Chinese markets some lift, but investors are still cautious.
Hong Kong's Hang Seng Index is still in the red so far this year, down 9% so far this year and down 4% from the previous week. Meanwhile, the CSI 300 – which tracks 300 stocks with the largest market capitalization listed in Shanghai and Shenzhen – is down about 6% so far this year and down 4% from last week.
China's economic data was also not rosy. Official data showed on Wednesday that manufacturing activity at large and state-owned companies fell for the fourth straight month in January.
In real estate, major Chinese cities Shanghai, Guangzhou and Suzhou eased restrictions on home purchases earlier this week to boost demand.
A state-backed real estate project in southern China's Guangxi province also received the first bank loan worth 330 million Chinese yuan, or $46 million, granted to a “white list” of real estate developers for bank financing, state-run Securities Times reported on Tuesday.
Consumer demand for real estate remains low
Still, overall consumer demand for the real estate market appears to be at a low point.
Preliminary data from China Real Estate Information Corp released on Wednesday showed new home sales fell by almost half in January compared with December. The value of new home sales by the country's largest real estate firms has fallen by about a third compared to last year.
Grow Investment's Hong told Bloomberg TV that the Chinese government's measures to support the real estate sector were piecemeal and elicited only marginal responses. But Beijing won't make it big because it doesn't want to reinflate the real estate bubble, he added.
Meanwhile, the market cannot count on Chinese consumers either.
“At this point, Chinese households have taken on a lot of debt. So asking them to borrow more and buy more properties is a big ask for them,” Hong said.
The world's second-largest economy is still trying to stage a convincing recovery more than a year after COVID-19 restrictions began to be lifted. It faces significant headwinds from a housing crisis, deflationary pressures and a demographic crisis.
“China is in the midst of a politically driven economic transition,” said Min Lan Tan, head of UBS's Asia-Pacific chief investment office, Nikkei Asia reported. “So it will be painful and involve significant risks,” Tan added.
Comments are closed.