China Finally Came To The Table With Better Numbers

China Finally Came To The Table With Better Numbers
Stéphane Renevier, CFA

4 months ago2 mins

What’s going on here?

China’s economy finally came to the table with better-than-expected stats, but investors weren’t tempted to dig in.

What does this mean?

China’s been stuck in a rut ever since the pandemic: the country’s money-making exports are being blanked by the rest of the world, the housing market needs more than a lick of paint, and youth unemployment is scarily high. But at long last, the world’s second-biggest economy may be making progress. China’s economy ticked up 4.9% last quarter from the same time last year, beating analysts’ prediction of 4.5%. And it pulled off a 1.3% uptick last month alone, mainly thanks to revitalized shoppers hitting the stores and giving retail sales their biggest bump since May.

China GDP

Why should I care?

For markets: One bad apple can ruin the bunch.

Chinese stocks barely budged after the news, though, indicating that investors are still wary of the country’s ailments. The long-suffering property sector is the biggest concern: the debt-laden sector holds most of Chinese families’ wealth, deciding their levels of confidence and spending habits. It checks out, then, that sales of stuff like furniture, building supplies, and home gadgets are pretty flat – plus major developers are still teetering on the brink of debt defaults. And while the government has tried its best to support the struggling sector, key indicators – property investment, home sales, and construction data – are still slipping downward.

China property slump

The bigger picture: The big reveal.

China’s government isn’t the only one funneling cash into its economy right now. Countries around the world are unveiling major building projects, enhancing public services, and heightening military budgets. Problem is, while this type of investment tends to support the economy, it also pushes inflation – and in turn, interest rates – higher. That’s a downer for stocks and bonds, but a blessing for commodities.

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