CHINA IS NOT WAKING UP
And so we continue our little round-the-world tour of the economic outlook for this autumn.
After the United States and Europe, let’s tackle China.
To sort out certainties and uncertainties.
Few uncertainties, and one big certainty : the economy is still not picking up.
IT’S THE BIG SURPRISE…
…of the last two years.
China.
And in particular, the weakness of Chinese growth.
We were expecting a rebound/delay/catch-up effect after 3 years of Covid.
And it failed.
Chinese consumers are no longer consuming.
Chinese companies are overflowing with inventories and trying to flood the world with their surpluses.
THE CAUSES ?
A major cause whose impact had not been measured.
Real estate.
In fact, for Chinese households, everything hinges on real estate.
As long as prices were soaring, the Chinese benefited from a wealth effect.
Now that the property bubble has burst, households are holed up in their shelters, spending very little.
Much to the despair of the central government.
AND IT CONTINUES
On and on…
Still no rebound in consumer spending
On and on…
Still no rebound in consumption.
Still no rebound in growth.
China is also weighed down by American pressure.
The United States has done to China what it did to Japan : as soon as it was announced that an Asian competitor was threatening to take over the world’s economic leadership, the United States unleashed a vast offensive, from sanctions to tariffs.
And it’s not over yet.
HOPE…
…for Chinese companies is a massive recovery plan.
There are already stimulus packages and support plans, notably for real estate, but they don’t have the necessary scale.
Consumers and entrepreneurs want more.
Xi Jinping is hesitating, held back by the weight of China’s overall debt.
Remember that he has set a minimum growth target of 5% : if China exceeds it this year, it will have manipulated the figures even more than usual…
In this context we doesn’t have a large exposition on China stock , we only have a China stock on our MSI world ETF $IUSQ.DE
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