Hello Everyone! Welcome to China Market Weekly Recap by Yuan Talks!
Mixed Macro Data
November brought mixed signals for China’s economy, with industrial production growth accelerating driven by policy support and the real estate market seeing signs of continued recovery, however, consumption and investment underperforming and external demand clouded by rising uncertainties.
The National Bureau of Statistics stressed that the overall recovery momentum remains intact, with major indicators showing notably improvement in Q4 compared to the previous quarter, with growth in industrial output, the service production index, and retail sales for the October-November period outpacing Q3 averages.
Fiscal revenue growth hit a double-digit rate for the first time in 18 months, driven by a second consecutive month of rising tax revenue, though foreign trade, consumption and real estate-related taxes remained subdued.
A senior official said that the economy is on track to achieve this year’s growth target of about 5%, policymakers are doubling down on initiatives to sustain recovery in 2025. The official stressed that China’s Central Economic Work Conference makes “comprehensively expanding domestic demand” top priority.
The authorities will expand the “Two New Initiatives” – large-scale equipment renewal and consumer goods trade-in initiative which they said contributed greatly to the recent pick-up in consumption, with more funding available and more products eligible for subsidies. The Ministry of Commerce said it’s working with relevant parties to formulate related policies.
Monetary Policy and Bond Market Developments
The People’s Bank of China (PBOC) reiterated its commitment to a moderately loose monetary policy for 2025, with plans to cut reserve requirement ratios and interest rates to support effective credit demand.
Recent policy signals drove Chinese government bond yields to record lows, widening the China-US yield spread to its largest since 2002, coinciding with foreign institutional investors cutting Chinese bond holdings for the 3rd straight month.
In response to a sharp rally in the bond market, the PBOC summoned financial institutions to caution against excessive trading and reaffirmed its zero-tolerance stance on illegal speculative activities.
Real Estate Recovery Shows Signs of Stabilization
China’s housing market is showing initial signs of stabilization. November saw more cities posting month-on-month price rises, with prices in tier-1 cities ending a 13-month streak of declines and drops in lower-tier cities narrowing.
In terms of local housing market highlights, the financial hub Shanghai reported a 5.4% year-on-year rise in real estate investment for January-November, with second-hand home sales projected to grow by 20% this year. Hangzhou recorded its highest land premium since 2018 during its latest auction, reflecting improving market sentiment. However, liquidity pressure on developers persists, and the sector is expected to remain in a bottoming-out stage through 2025.
Stock Market and SOE Reforms Boost Sentiment
In the A-share market, China’s new guidelines on improving state-owned enterprises’ (SOEs) market value management spurred a rally in SOE stocks. The policy, which integrates market value into performance evaluations for executives, has driven positive sentiment. Regulatory push for enhanced investor returns this year has led to a surge in cash dividends and record-high stock buybacks among listed companies.
Steel, Coal Face Pressure
In commodities, steel demand and output are projected to decline further in 2025, according to both state-owned and private commodity research institutes.
Coal prices hit their lowest levels this year despite the peak season for coal consumption in winter, amid rising production and record imports, causing coal stocks to slide. According to a report from IEA, global coal production is expected to reach a new high in 2024, with China likely experiencing an oversupply.
Tourism and Travel on the Rise
China extended visa-free transit stays to 10 days and added more entry points, making it easier for foreign travelers to visit the country. The announcement of the extension led to a surge in online searches for domestic hotels and inbound flights.
So far this year, China’s inbound flight bookings by foreigners have doubled from a year earlier, contributing to a recovery in inbound tourism to 90% of 2019 levels. Overall, Chinese airlines’ passenger volume reached record highs, with international flight passenger traffic hitting 88% of pre-pandemic levels.