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IMF Staff Country Report-People's Republic of China: Selected Issues
February 12, 2024--Summary:
SMOOTHING THE PATH TO A NEW NORMAL: CHINA'S PROPERTY SECTOR TRANSITION1
The Chinese authorities have taken resolute actions to address the risks from the property sector since
the start of the pandemic. The key challenge now is to smooth the transition of the sector to a smaller,
more sustainable size amid unresolved financial distress among developers, weakened home buyer confidence, and a backdrop of large inventories and structurally declining demand.
Key policy priorities should be to expedite the resolution of underlying supply-side imbalances, most importantly by
restructuring nonviable developers; support and de-risk surviving developers; and take steps to contain
the buildup of risks in the property market.
A. Introduction: China's Real Estate Markets at a Turning Point China's Real Estate Markets: An Overview
1. Real estate activity has been important for China's rapid growth but has come with
significant risks. Property-related activities accounted for an estimated 20 percent of GDP through
China's decades of rapid growth, with real estate ubiquitous as a form of collateral and household
wealth. While the authorities proactively limited risks from household leverage, average sales prices
still rose almost 350 percent in the 15 years through 2021 and remain at significantly stretched
levels relative to incomes. This price growth partly reflected strong investment-driven demand from
households, driven by massive savings, a mortgage lending boom, and limited investment alternatives. At the same time, the country's large developer sector leveraged up heavily to expand
construction at a rapid pace, often working closely with local governments who relied on property
activity for revenues.
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Source: imf.org
Japan: Staff Concluding Statement of the 2024 Article IV Mission
February 8, 2024--The Japanese economy continues to recover from the pandemic. Initially driven by cost-push factors, inflation is becoming demand driven with the output gap closed and labor shortages intensifying . In the near term, the focus should shift to tighten fiscal policy and wind down unconventional monetary policy, while maintaining financial stability.
In the medium term, the priority is to rebuild fiscal buffers, strengthen the fiscal framework, and advance structural reforms, with labor market reforms at the forefront, to support potential growth.
RECENT DEVELOPMENTS, OUTLOOK, AND RISKS
The economic recovery picked up in 2023 and the output gap is estimated to have closed. Core inflation (excluding fresh food and energy) seems to have peaked at a high level and is becoming demand driven.
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Source: imf.org
IMF Staff Country Report-People's Republic of China: 2023 Article IV Consultation-Press Release
February 2, 2024--Summary:
China has enjoyed decades of impressive growth, which has significantly improved living standards and largely eradicated extreme poverty. The growth has, however, been accompanied by widening imbalances and rising vulnerabilities, as excessive investment in infrastructure and housing has resulted in rising debt levels among property developers, local governments (LG), and local government financing vehicles (LGFVs).
The authorities have proactively sought to contain developer leverage. This has contributed to a significant, but needed, adjustment in the property market that continues to weigh on economic activity, including through its impact on LG finances.
Amid these structural challenges, the authorities have appropriately announced their goal to transition to high quality growth while tackling risks from the property sector and LG debt.
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Source: imf.org
China's Real Estate Sector: Managing the Medium-Term Slowdown
February 2, 2024--Accelerated cleanup of distressed developers and other policies will help smooth the path to a smaller, more sustainable role in the economy
Real estate has long been important for China's economy, driving its rapid growth in recent decades and accounting for as much as 20 percent of activity.
This reliance has, however, been accompanied by the buildup of significant risks.
Home prices became significantly stretched relative to household incomes in the decade before the pandemic, in part because consumers preferred to invest their considerable savings in real estate given the scarcity of attractive alternative savings options. Expectations of continued increases in home and land prices allowed property developers to borrow rapidly, with land sales providing crucial revenue for local governments.
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Source: imf.org
IMF Staff Country Report-Thailand: 2023 Article IV Consultation
January 30, 2024--Thailand's economic recovery from the COVID-19 pandemic and multiple shocks in 2022 is continuing, amid elevated uncertainty.
Growth is projected at 2.5 percent in 2023, broadly on par with 2022, while inflation is expected to remain well-within the authorities' target range.
Policies have gradually normalized to support growth and financial stability while protecting the population from the high inflation, but there is limited space to absorb new shocks. Heightened global uncertainty, with downside risks prevailing, puts an extra premium on prudent macroeconomic management.
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Source: imf.org
'Snowball' derivatives feed China's stock market avalanche
January 23, 2024--China's plunging stock market is leading to losses on billions of dollars worth of derivatives linked to the country's equity indexes, forcing a vicious cycle of selling in stocks and futures contracts as market participants manage their risks.
Stock markets in Hong Kong and in mainland China plunged on Monday, extending a long spell of weakness driven by an exit of foreign investors alarmed by China's wobbly economy and a lack of stimulus measures.
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Source: reuters.com
Homegrown asset managers grab limelight in Asia ETF boom
January 19, 2024---ChinaAMC, E Fund and Taiwan’s Yuanta have been among the biggest beneficiaries in the Asia-Pacific
Double-digit growth in exchange traded fund assets across many Asia-Pacific markets last year helped a handful of local fund firms strengthen their position as market leaders.
Taiwan, South Korea and China stood out as the fastest-growing ETF markets in the Asia-Pacific region during the first nine months of 2023, with ETF asset growth rates of between 26 per cent and 31 per cent, Broadridge data shows.
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Source: ft.com
China's $6.3 Trillion Stock Selloff Is Getting Uglier by the Day
January 19, 2024---Property sector's slump and geopolitical risks are negatives
China's valuation discount to India hit a record this week
Chinese stocks just capped another dismal week, with a gauge of mainland firms listed in Hong Kong languishing at the bottom of global equity index rankings for the year so far.
Grim milestones have kept piling up in recent days: Tokyo has overtaken
Shanghai as Asia's biggest equity market, while India's valuation premium over China has hit a record. Locally, a meltdown in Chinese shares is wreaking havoc on the nation's asset management industry, pushing mutual fund closures to a five-year high.
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Source: bloomberg.com
China's Economy Grew 5.2% in 2023, Chinese Premier Li Qiang Says
January 16, 2024--The National Statistics Bureau is due to publish 2023 growth figures on Wednesday
China's economy grew around 5.2% in 2023, Chinese Premier Li Qiang said Tuesday, a day before the country's statistics agency is due to release full-year growth figures.
"Last year in 2023, the Chinese economy rebounded and moved upward, with an estimated growth of around 5.2%, higher than the around 5% target set at the beginning of last year," Li said during an address at the World Economic Forum in Davos.
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Source: wsj.com
China's economy faces growing deflationary pressures as prices extend fall
January 12, 2024--Dec CPI fell year-on-year
CPI in 2023 was 0.2%, compared with around 3% government target
Dec PPI was down from a year earlier, steeper than expectation
China's consumer prices declined for a third month in December while factory-gate prices extended their prolonged slide, highlighting persistent deflationary pressures in an economy struggling to mount a solid recovery.
The consumer price index (CPI) shed 0.3% in December from a year earlier, and was up 0.1% month-on-month, data from the National Bureau of Statistics (NBS) showed on Friday. November's index dropped 0.5% in annual and monthly terms.
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Source: reuters.com
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