Recently, IDFC Mutual fund shared an interesting report sharing 10 charts describing the slowdown in China.
Here’s a summary of the same :
Many countries, particularly in the developed world, are now looking at an economic slowdown ahead in the face of policy tightening by central banks to reign in high inflation.
China, on the other hand, has been facing several domestic economic issues since 2021 - a property sector meltdown which started with the payment default by a major property developer, power crunch due to coal shortage last year, multiple and extensive lockdowns as part of its Zero Covid Strategy and the recent power rationing as a severe drought impacted hydropower generation. As policy tightening by developed market central banks continue to take centerstage, is the Chinese slowdown the elephant in the room? In this note, we look at the nature and extent of this slowdown through ten key charts.
Charts
1. Manufacturing PMI has moderated since early 2021, after the goods demand related pickup in H2 2020, but it likely does not reflect the extent of growth slowdown China is experiencing as it looks set to miss the 2022 growth target of 5.5% by a fair margin
2. Government bond issuance has picked up in the last one year but overall credit (aggregate financing) is still sluggish as growth in loans, the main component, continues to moderate
3. Overall FAI growth has held up but real estate investment growth has fallen due to property sector woes which is a drag on growth
4. Property prices and supply have fallen considerably
5. … and this drop in property prices has been very broad-based impacting household wealth
6. Retail sales, post the onset of the pandemic, has been very weak (albeit a bit volatile recently) and is still below levels implied by the pre-pandemic path
7. Consumer loan growth has also slowed - by over 9ppts over the last eighteen months
8. Overall consumer confidence has thus plunged
9. Although headline CPI inflation has been inching up, core-CPI has been benign at under 1% y/y. PPI has been coming off since late 2021, which is good for global goods prices and offers scope for domestic policy stimulus measures
10. RRR and the LPR rate linked to mortgage rates have been cut but these are not major moves
Source : CEIC, IDFC MF Research.
In case you missed it, Do check out our Newsletter’s edition on China :