When China starts pumping up its real state market and turns a blind eye to provincial shadow banking, then you know things are not going according to plan in Beijing
Off-book lending at the provincial level is expected to pick up again, Nomura Securities’ chief China economist believes. Photo: Michele Limina/Bloomberg photo credit: © 2019 Bloomberg Finance LPIt hasn’t happened yet, but it’s bound to. China’s stimulus worked, then it didn’t. The trade war is going into overdrive now, with threats to put tariffs on everything Made in China that comes into the U.S.
Recent economic data is showing signs of retreat. China bears will love to point out that the economy is stalling, even though numbers are still mostly positive. They just are not as positive as they were a quarter ago or more. “The latest Chinese economic activity data was disappointing,” says Neil MacKinnon, an economist for VTB Capital in London. VTB is a Russian-owned investment firm. “The Chinese equity markets responded positively it can only prompt further policy stimulus,” he says.
Fiscal policy moved to a pro-growth stance in the first quarter, though the size of the fiscal stimulus, sitting between 0.5% and 1.0% of GDP, is limited because of upward pressure on budget deficits and Xi Jinping’s very vocal promise to curb excess debt and leverage.At times like these, who knows? No one has ever taken it to China like Donald Trump. It is unclear how China will respond, except now we know that Beijing considers this a trade war now rather than a trade dispute.
Property investment growth is unchanged at 12% in April from March but higher than 2018’s growth rate of 9.5%.ew home sales was 1.3% April versus 1.8% in March, which is better than the first-quarter growth rate and on par with all of last year. Real estate is still being pressured not to go gang busters.
Nomura Securities’ chief China economist, Ting Lu, expects strong headwinds to exports, property markets in lower-tier cities, passenger car sales, mobile phone sales and construction equipment going forward.Xi Jinping has always been against shadow banking and real estate bubbles. His government might have to turn a blind eye to both.
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