China's first quarter GDP grew 4.5%, helped by a return of shoppers and signs of a recovering real estate sector. Yet demand is uneven, and flattering base effects from last year’s lockdowns will wear off, says petesweeneypro
revealed with its first-quarter earnings that payments via its app appeared concentrated on low-ticket consumer items purchased offline. Meanwhile, Chinese savers added another 10 trillion yuan to their household deposits in the first quarter, reinforcing concerns that they will keep hoarding instead of splurging.
As for real estate, which drives an estimated one quarter of output, home prices are recovering mostly in wealthy cities, whereas the crisis is concentrated in the hinterlands. Property construction and investment remain down. With inflation at 0.7%, there is room for targeted government stimulus to help broaden and entrench the recovery. Channelling it is the problem. Fiscal spending on infrastructure is Beijing’s reflex because it generates growth and jobs, but low returns from building subway lines and the like in economically distressed areas aggravate the country’s municipal debt crisis, which is investors’ second-largest concern after the U.S.-China relationship, per a Goldman Sachs survey.
Any interest-rate adjustments might flow into property speculation, which President Xi Jinping hates, and the business community is more concerned about sales than credit anyway. Bank loans hit an all-time high of 10.6 trillion yuan in the first quarter, yet that did not appear to translate into private investment in fixed assets, which is barely growing. Industrial profits fell 23% last month.
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