Hello everyone! Welcome to China Market Weekly Recap by Yuan Talks!
The biggest news this week is the escalating tech war between China and the US. For the third time in three years, the US tightened its export controls on advanced semiconductors to China, placing 140 companies on its Entity List, to cut off China’s access to critical chip technology.
The move prompted immediate retaliation. Beijing accused the US of economic coercion and long-arm jurisdiction while banning the export of certain essential semiconductor metals. Industry associations representing China’s semiconductor, internet, automotive, and telecommunications sectors declared US chips unreliable and urged caution in procurement.
Adding to the tension, Beijing imposed sanctions on US military firms and executives in response to arms sales to Taiwan, further intensifying the standoff between the two superpowers.
On the domestic economy, more signs of recovery emerged. November saw manufacturing activity expand at its fastest pace since March, with new orders surging and production growth hitting a four-month high. While the service sector grew at a slower pace, business confidence hit a seven-month high. The logistics sector also showed improvement and warehousing operations returned to expansion, driven by stronger demand amid rising economic activity and e-commerce promotions. Economists noted that short-term stabilization is evident, though sustained efforts are necessary to consolidate growth.
Notably, two top state media outlets issued editorials stressing qualitative improvements in the economy, signaling that GDP growth below 5% is acceptable.
On the policy front, central bank governor Pan Gongsheng said that the People’s Bank of China (PBOC) would continue its supportive monetary policy stance and step up counter-cyclical adjustments. Analysts predict the PBOC may implement reserve repo operations and cut reserve requirement ratio (RRR) in December to stabilize liquidity.
Looking ahead to 2025, PBOC advisors proposed setting a growth target of around 5% and raising the deficit ratio above 3.8%, recommending stronger policy support to navigate ongoing challenges.
China’s real estate market continued to show signs of recovery in November. In tier-one cities like Shanghai and Shenzhen, second-hand home sales hit multi-year highs, while tier-two cities such as Hangzhou and Wuhan recorded strong growth in housing market.
Developers capitalized on the improving sentiment, with bond financing growing for the third straight month and private developers’ issuance hit its highest level this year. The land market showed signs of recovery, with land premiums in major cities hitting their highest levels this year.
Into December, the new housing tax benefits, effective December 1, cut taxes by 8.4 billion yuan within five days, contributing to a 24% nationwide increase in housing transactions, according to the tax authority.
In the financial markets, the Shanghai Composite Index gained 2.3% for the week, jumping above the 3,400 mark, while the Hang Seng Index rose 2.3%.
A total of 170 listed companies have announced plans for stock buybacks and shareholding increases using refinancing loans, a tool introduced by the PBOC to support the stock market. It’s reported that regulators have adjusted the requirements for such refinancing loans and introduced new restrictions to ensure proper implementation and prevent abuse.
Notably, the latest data showed that outstanding margin financing in the A-share market hit to a nine-year high, largely fueled by retail investors and hot money, leading market insiders to warn about rising risks.
Government bond yields fell below 2% to hit record lows, driven by new rules for interbank deposits and hopes for more monetary easing. The currency markets faced headwinds as the yuan depreciated sharply, briefly losing the 7.31 per dollar mark in offshore trading before recovering slightly.
Some industry news. In the photovoltaic (PV) sector, China is expected to achieve record new capacity installations in 2024. Amid a prolonged market downturn, leading PV firms signed a self-discipline agreement to control production levels, though no formal quotas were set.
Elsewhere, China made strides in trade relations by lifting bans on two Australian meat processing firms, signaling progress in resolving a long-standing trade dispute. Domestically, the government rolled out guidelines to enhance urban infrastructure development by 2027 and outlined strategies to boost the ice and snow economy in northeastern China. The country also aims to modernize its commercial distribution system and explore AI education in primary and middle schools.
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!