4 months ago • 2 mins
What’s going on here?
Data showed that China’s economy is still in hot water – but government stimulus measures could help soup things up.
What does this mean?
China’s economy has been as weak as water of late, and it seems that wishy-washy energy has spilled into the second half of the year too. After all, with demand still on shaky ground, it’s no surprise that companies are playing it safe when it comes to production. And that might explain why the manufacturing sector shrank again in July, though not as much as the number-crunchers thought it would. And while services and construction were still in growth territory, they actually fell short of expectations. Don’t despair just yet, though: the government has announced a slew of measures to boost consumption and lend a helping hand to a range of industries, from real estate to cars and services.
Why should I care?
For markets: Taking stock of the situation.
Authorities are taking steps to put that talk into practice, and that’s warming investor sentiment – with Chinese stocks in Hong Kong on track for their best month since January, and inflows into Chinese stocks back in the black. As long as policymakers keep the support coming, this could mark the start of a market revival. Some analysts reckon that while there will be some turbulence, the dips should get progressively higher. After all, China isn’t grappling with rampant inflation like its Western counterparts, and valuations are discounted heavily compared to other major markets.
The bigger picture: Weathering the (literal) storm.
In the short term, China’s extreme weather is set to throw a wrench in the works, stimulus or no stimulus. With heatwaves and floods playing havoc with infrastructure and logistics, production is likely to take a hit. And when one of the fiercest storms in years has Beijing residents hunkering down indoors, it’s clear that demand isn’t exactly going to be booming.
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