Hello everyone! Welcome to China Market Weekly Recap by Yuan Talks.
This week brought some encouraging data for China’s economy as key indicators pointed to continued recovery in the manufacturing sector.
Factory activity expanded at a faster pace in November, with both market demand and production picking up for the third consecutive month, showed the official manufacturing purchasing managers’ index (PMI). The decline of Chinese industrial companies’ profit narrowed sharply in November, largely driven by a recovery in the manufacturing sector. On the downside, non-manufacturing activity expanded at a slower pace and construction activity returned to contraction.
The country has seen accelerated progress in consumer goods trade-in program and the strong momentum is expected to remain robust in the rest of year, according to analysts at CICC.
The plan for local governments to issue special bonds to swap hidden debt, an effort to stabilize local finance and free up resources for economic development, is advancing. So far, 24 regions have announced or issued a total of nearly 1.5 trillion yuan of such bonds.
Looking ahead, the upcoming tone-setting Central Economic Work Conference, traditionally held in mid-December, is under close market watch. Citic Securities expects that the top leadership will continue to emphasize strengthening counter-cyclical policies, though more specific economic targets will only be released during the annual session of the National People’s Congress in March next year.
On the global trade front, tensions resurfaced as the US President-elect Donald Trump proposed additional tariffs on Chinese goods. China reiterated that trade wars yield no winners and reaffirmed its commitment to maintaining the smooth operation of supply chains.
Analysts at Morgan Stanley believes that the impact of upcoming US tariffs on Chinese goods this time will likely be less severe than in 2018 as Chinese companies have established global supply chain.
In the stock markets, major indices remained rangebound, but optimism continues to build. Analysts at Goldman Sachs believe that Chinese equities are poised for a rebound in 2025, with domestic investors to play a more significant role. They see onshore A-shares outperforming H-shares in the near term, buoyed by favorable policies and investor confidence.
Long-term projections are equally promising, with JPMorgan Asset Management forecasting annualized returns of 6.6% over the next decade or more, highlighting cyclical opportunities even after recent market rallies.
The real estate market momentum remained strong in November, with the top 100 property developers’ sales falling at slower pace in the January – November period and home prices showing signs of stabilization. Particularly in Shenzhen, new and second-hand home transactions both more than doubled year-on-year.
In addition, top developers’ land spending fell at slower pace in the January – November period, though state-owned developers remained dominant buyers.
However, property developer still faces challenges, as the latest data showed that China’s listed developers experienced substantial net cash outflows in the third quarter, further weakening short-term debt repayment capacity.
The automotive industry made headlines. Carmakers are ramping up year-end promotions to meet their annual sales targets, with more than 10 automakers including Tesla, Li Auto and Nio having launched limited-time discounts so far in November.
BYD Company has reportedly requested a 10% price cut from suppliers, currently targeting suppliers of electronic controls and sensors but expansion to other categories possible. SAIC Motor’s subsidiary is also said to have requested supplier to cut prices as it sees cost-cutting the dominant theme in the auto industry in 2025.
Meanwhile, Tesla said that it has shortened its payment cycle for supply chain partners to 90 days, while most Chinese automakers extend the payment cycle amid intensified market competitions.
In tech, China launched a special campaign targeting algorithm governance to address issues such as “information cocoons,” user addiction, and data-enabled price discrimination, among others, underscoring Beijing’s focus on fostering a fair and transparent digital ecosystem.
In the logistics sector, China sets an ambitious target to lower logistics costs as a percentage of GDP to 13.5% by 2027 and aims to foster globally competitive logistics companies.
Meituan continued its impressive performance, with its third-quarter revenue growing by 22%, exceeding market expectations, and adjusted net profit growth far outpacing the previous quarter. It vowed strategic investments to support merchants and strengthen business operations.
That’s a wrap on the highlights in the past week! Stay connected with Yuan Talks for the latest from China Market. We are live every trading day!