One run is thought to be weak from Chinese economic data This month has increased the heat on policymakers to deliver more stimulus measures, but it also shows the limited effect of monetary easing and infrastructure spending can have. Signs of weakness are emerging from across the economy: exports are down; inflation slows down; new bank lending tumbled.
And all despite the authorities bucking global trends so far this year and implementing monetary and fiscal easing this year. Analysts say the weak data could increase pressure on policymakers to deliver more stimulus – JPMorgan and Goldman Sachs analysts said in a research note on Friday they expect a 25 basis point rate cut in the coming week.
But the latest figures also show that the stimulus will not have the desired impact as long as domestic and external demand remain subdued, especially as China follows a policy to eradicate the outbreak of COVID-19 as soon as it happens.
“Weaker-than-expected credit growth … underscores the difficulty policymakers face in stimulating growth while activity is suppressed by zero-covid,” said Mark Williams, chief Asia economist at Capital Economics. China is on track to miss its annual growth target of around 5.5% – the latest Reuters poll forecasts 2022 growth at 3.2%.
Exports fell unexpectedly in October for the first time since May 2020. Chinese manufacturers, which dominate global trade, have failed to get a pre-Christmas surge in the summer. Now, the usual year-end shipment surge that comes as overseas clients’ front-load orders ahead of the Lunar New Year holiday in January-February is also in doubt.
A drop of almost 12% in the yuan against the dollar so far this year could not prevent exports from contracting.With high inflation and rising borrowing costs in China’s main export market, and domestic demand. crippled by tough COVID restrictionsit is difficult to see where the demand for credit can come from even if the rates are cut.
The burst of The huge Chinese property market bubble – which accounted for a fifth of economic activity at its peak – also keeps both home buyers and banks reluctant to engage in transactions. Data on Thursday showed new bank lending in China fell more than expected in October from the previous month while credit was wide. growth slowed.
“The fourth quarter is usually a quiet time for loans and credits, but this data set for October is too soft,” said Iris Pang, chief economist for Greater China at ING. “Local media reported that the Chinese authorities have allowed the local government to open part of the special bond quota in 2023 for such projects. China’s zero-COVID policywhile the long-term drag remains domestic demand.
China on Friday gradually eased some of its COVID rules, raising hopes that more significant measures could be in the pipeline. read more “The curbs of COVID have greatly affected consumption and investment,” said Wang Jun, director at the China Chief Economist Forum. “As the COVID restrictions become more targeted and looser, consumption pressures may ease.”