Growth was a big topic this week with the GDP number for Q3 coming in at only 4.9%, even against the pandemic-hit Q3 of 2020. One analyst predicted that the Q4 GDP growth rate would be 2.5%. The causes of the slowdown are many, including the continuing power cuts, property market woes, and a general slowdown in the real economy. But there is no sign that the Center intends to address the issue with massive stimulus packages. The days of Premier Wen Jiabao declaring in 2008 that China would “hold to 8%” growth – BAO BA!!! – are long gone. And there are indications that the Center is anyway looking to shift the narrative away from the GDP growth number. Growth is no longer the goal by itself, it is now “common prosperity,” depending on how that phrase is interpreted.
But the malaise in the property sector remains a key issue, even though people have now realized it is not going to up-end everything. The troubled property group Evergrande got a three-month extension on some of its bond repayments falling due, but it failed to offload Evergrande Property Services as a way to raise cash. Another property developer, Sinic, defaulted on payments of $246m and Modern Land (China) canceled payments on $250m, and everyone is wondering how many nearly distressed property developers are waiting in the wings. The wider property market, a cornerstone of the Chinese economy, is increasingly showing signs of being impacted. Investments made by property developers fell 3.5% year-on-year in September, and home sales by value fell 16.9% in the same month from a year earlier. The floor area of new construction projects started in the month fell 13.5% and home price growth has stalled. Beike Zhaofang, an online property agency platform, facing a hard winter, fired many of its staff. But Vice Premier Liu He calmed a lot of nerves when he declared that risks in the country’s property sector are controllable.
Enjoy the weekend and turn off the lights.