‘It’s very alarming’ – China slowdown scares markets

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China’s economic slowdown deepened in July on a deepening housing slump and ongoing coronavirus lockdowns, with an unexpected rate cut unlikely to change things as long as these dual strains remain in place.

Retail sales, industrial production and investment slowed in July, missing economists’ estimates.

The surveyed unemployment rate among 16-24 year olds climbed to 19.9 percent, a record high and a headache for the Communist Party as it prepares for a major congress in the coming months that is expected to see President Xi Jinping take a precedent-defying third place will procure term in power.

“July’s economic data is very alarming,” said Raymond Yeung, Greater China economist at the Australia and New Zealand Banking Group.

“The authorities must fully support the Covid policy from property to stem further economic decline.”

The data points to a crisis of confidence among Chinese businesses and households and poses another threat to the global economy as global demand for everything from Apple iPhones to luxury goods takes a hit.

At the same time, a deepening property slump is being felt both at home and abroad as commodity prices such as iron ore and copper plummet.

China’s bonds rose and the offshore yuan weakened as investors absorbed disappointing data prints and the rate cut. A rally in equities cooled across Asia, commodities fell and the dollar rose as grim news spread across financial markets.

China’s leaders have ruled out large-scale stimulus and vowed to continue with their strict zero-Covid policy, which urges authorities to close businesses and lock down the populace if major outbreaks occur — as is now happening on the resort island of Hainan . That clouds growth prospects for the rest of the year, which economists further downgrade to below 4 percent.

China’s central bank cut both one-year and seven-day lending rates by 10 basis points, a move economists said would have little impact as Covid controls have left households and businesses reluctant to borrow. Loan originations rose at the slowest pace in July since at least 2017.

“The rate cut shows that the whole economy is in trouble,” said ING’s Iris Pang. A wave of household mortgage boycotts over uncompleted projects has made households nervous about home buying and lessened the impact of lower mortgage rates, she added.

The economic slowdown, which began in March when authorities imposed lockdowns in dozens of cities to combat Covid outbreaks, has spread to major economies like Germany and South Korea as China’s demand for manufactured goods slumps.

Nomura Holdings said growth in the second half of the year will be significantly hampered by the zero-Covid policy, the housing market’s downward spiral and a likely slowdown in exports as the global economy slows.

“Beijing’s policy support may be too small, too late and too inefficient,” Lu Ting’s economists wrote in a note.

https://www.independent.ie/business/world/its-very-alarming-china-slowdown-spooks-markets-41914096.html ‘It’s very alarming’ – China slowdown scares markets

Fry Electronics Team

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