HONG KONG (Reuters Breakingviews) - A porcine calamity has left China’s statistics looking muddier than ever. African swine fever has driven pork prices up by roughly half over the past year, according to the National Bureau of Statistics. Inflation remains in check regardless, prompting some charges that Beijing’s number-crunchers might be massaging the data. Other factors make that unlikely, but Beijing’s credibility deficit means a little transparency would go a long way.
HONG KONG (Reuters Breakingviews) - China is aiming its retaliatory trade war salvos away from Wall Street. Goldman Sachs has applied to take a majority stake in its local joint venture, and it may well get it. Despite tensions, Beijing appears open to U.S. banks boosting their mainland presence. Their lack of market heft means they don’t threaten local rivals much, and China may need their help in the future.
HONG KONG (Reuters Breakingviews) - Beijing keeps skirting around its formidable capital controls. Quotas on a pair of high-profile inbound investment schemes are being scrapped in a somewhat symbolic move. China wants more foreign funds, but not enough to put outbound flows at risk.
HONG KONG (Reuters Breakingviews) - It’s a 5G fix that reflects a costly global reality. The two smallest of China’s three state-owned carriers will join forces to build a next-generation network. Cooperation could shave about $50 billion off a bill likely to be several times that. The solution suits Beijing’s ambitions to take the lead; it’s a sensible one too.
HONG KONG (Reuters Breakingviews) - The shopping spree in China is not all it’s cracked up to be. Sales of athletic gear, appliances and the like have been rising robustly despite fiercer economic headwinds. Tax cuts and healthy property prices are helping. Without such support, however, retailers are apt to feel the pinch.
HONG KONG (Reuters Breakingviews) - China’s real estate cold turkey risks withdrawal. The economy is cooling, the trade war is worsening, yet Beijing still refuses to juice housing markets. Injecting stimulus without touching a sector that feeds about 15% of GDP won’t be easy. That officials are trying suggests the government is willing to bear unprecedented pain to hold home prices down. The prospect of Beijing loosening home purchase restrictions to jolt growth has tantalised markets for months. During a growth scare early this year and in late 2018, it seemed they might, leading several local governments to quietly ease measures. Then, after strong first-quarter growth, a Politburo meeting readout inserted an oft-repeated slogan that “houses are for living, not speculating,” a hint policy relaxation was not imminent. In late July, another Politburo meeting vowed not to use property as a tool for short-term stimulus, even though Chinese real estate props up demand for everything from cement to glass to toilets to furniture, not to mention loans. Leaders may be reluctant to let property loose because home prices have decoupled from the broader economy. GDP growth cooled to 6.2% in the second quarter of this year, compared to 6.7% growth in the same period of 2018. Yet average new home prices keep rising at about 10% year-on-year, even as property sales have been flat. Should China ease purchase restrictions, prices would almost certainly spike upward, which could inflate bubbles. Some analysts also worry higher mortgage payments would end up crowding out other purchases, like automobiles. Some developers are already showing signs of squeeze. China Evergrande Group, for instance, reported on Wednesday that its first-half net profit fell by nearly half compared to the same period in 2018. Land sales accounted for 28% of their total fiscal revenue in 2018, notes Moody’s Investors Service. They declined by nearly 10% in the first quarter, just as income is being eroded by tax cuts intended to goose business activity. That might in turn weaken the fiscal ability to stimulate, and also pay off nearly 20 trillion yuan in recognised debt. It's a risk Beijing seems willing to take.
HONG KONG (Reuters Breakingviews) - China’s oil and gas titans are heeding the call to spend. President Xi Jinping called for a boost to energy security, and first-half figures suggest state giants listened: $81 billion Sinopec, for one, nearly doubled capital expenditure. That contrasts with caution seen abroad. U.S. sanctions only add urgency to national service.
HONG KONG (Reuters Breakingviews) - Get ready for Beijing-backed businesses to expand anew. They account for about a quarter of China’s GDP, according to one new estimate, but there are signs the proportion may grow. Cushioning a weakening economy is a big burden.
HONG KONG (Reuters Breakingviews) - Donald Trump’s containment talk will harden Beijing’s hardliners. The U.S. president on Friday announced additional 5% tariffs on some $550 billion of Chinese imports, and told American companies to explore relocation. He also said he will make sure the American economy stays larger than China’s. It can only feed Beijing’s suspicions that the real goal of the United States is holding the People’s Republic back.
HONG KONG (Reuters Breakingviews) - China’s lending policy is inching along the path to market. The central bank’s latest move to reform the way mainland interest rates are set pushes aside a long-standing benchmark decided by officials. It’s an overdue step designed to ease credit conditions and help companies borrow. Transmission problems remain, but a move closer to a more responsive system is welcome.