{"id":11555,"date":"2023-08-14T08:03:40","date_gmt":"2023-08-14T08:03:40","guid":{"rendered":"https:\/\/isafespend.com\/news\/chinas-economic-challenges-gather-steam-as-new-loans-plunge-property-fears-loom\/"},"modified":"2023-08-14T08:03:41","modified_gmt":"2023-08-14T08:03:41","slug":"chinas-economic-challenges-gather-steam-as-new-loans-plunge-property-fears-loom","status":"publish","type":"post","link":"https:\/\/isafespend.com\/?p=11555","title":{"rendered":"China&#8217;s economic challenges gather steam as new loans plunge, property fears loom"},"content":{"rendered":"<div id=\"RegularArticle-ArticleBody-5\" data-module=\"ArticleBody\" data-test=\"articleBody-2\" data-analytics=\"RegularArticle-articleBody-5-2\"><span class=\"HighlightShare-hidden\" style=\"top:0;left:0\"><\/span><\/p>\n<div class=\"group\">\n<p>BEIJING \u2013 China&#8217;s economy is running into more challenges.<\/p>\n<p>Credit data for July released Friday showed a slump in demand from businesses and households to borrow money for the future. Real estate problems persist with once-healthy developer <span class=\"QuoteInBody-quoteNameContainer\" data-test=\"QuoteInBody\" id=\"RegularArticle-QuoteInBody-1\">Country Garden<span class=\"QuoteInBody-inlineButton\"><span class=\"AddToWatchlistButton-watchlistContainer\" id=\"-WatchlistDropdown\" data-analytics-id=\"-WatchlistDropdown\"><button class=\"AddToWatchlistButton-watchlistButton\" data-testid=\"dropdown-btn\"><span class=\"AddToWatchlistButton-addWatchListFromTag\"><\/span><\/button><\/span><\/span><\/span> now on the brink of default. Consumer sentiment is weak.<\/p>\n<p>&#8220;The weak July credit data suggest the downward spiral of the property sector continues, and worsening geopolitical tensions add to the uncertainty,&#8221; Lu Ting, chief China economist at Nomura, and a team said in a report Friday.<\/p>\n<p>&#8220;In Japan during the 1990s, corporates might have paid down their debt to improve their chances of survival, but in today&#8217;s China, corporates and households are cutting their borrowing due to a lack of confidence (and trust),&#8221; the report said.<\/p>\n<\/div>\n<blockquote data-test=\"Pullquote\">\n<div class=\"Pullquote-pullquote\" style=\"border-top-color:#002f6c\">\n<div>\n<p>All the factors just cannot mask how weak credit demand is and how low risk appetite is.<\/p>\n<div class=\"Pullquote-sourceWrapper\">\n<p>Xiangrong Yu<\/p>\n<p>chief China economist, Citi<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/blockquote>\n<div class=\"group\">\n<p>New local currency bank loans plunged by 89% in July from June to 345.9 billion yuan ($47.64 billion), less than half the 800 billion yuan analysts had forecast in a Reuters poll.<\/p>\n<p>The July new yuan loan number was the lowest since late 2009, according to Reuters.<\/p>\n<p>Those figures &#8220;should mark a low&#8221; since policy moves in June could have moved up some demand, Xiangrong Yu, chief China economist at Citi, and a team said in a note.<\/p>\n<\/div>\n<div role=\"region\" aria-labelledby=\"Placeholder-ArticleBody-Video-107284983\">\n<div role=\"button\" tabindex=\"0\" id=\"Placeholder-ArticleBody-Video-107284983\" class=\"PlaceHolder-wrapper\" data-vilynx-id=\"7000311606\" data-test=\"VideoPlaceHolder\">\n<div class=\"InlineVideo-videoEmbed\" id=\"InlineVideo-0\" data-test=\"InlineVideo\">\n<div class=\"InlineVideo-wrapper\">\n<div class=\"InlineVideo-inlineThumbnailContainer\"><span class=\"InlineVideo-videoButton\"><\/span><span><\/span><\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"group\">\n<p>&#8220;Yet all the factors just cannot mask how weak credit demand is and how low risk appetite is,&#8221; the analysts said, noting expectations for rate cuts by the end of September. Without such cuts, they expect a greater risk that China misses its growth target of around 5% this year.<\/p>\n<p>On Tuesday, China is set to release July economic data that&#8217;s expected to show no change from June in the pace of growth for industrial production and fixed asset investment, according to a Reuters poll. \u00a0<\/p>\n<p>Retail sales are expected to rise 4.7% year-on-year pace in July, slightly faster than in June, the poll showed.<\/p>\n<\/div>\n<h2 class=\"ArticleBody-subtitle\">Real estate drag<\/h2>\n<div class=\"group\">\n<p>China&#8217;s massive real estate sector, where the majority of household wealth is parked, has reemerged as an area of concern that it could drag down the broader economy.<\/p>\n<p>Developer Country Garden announced over the weekend it was suspending trading in at least 10 of its mainland-China traded yuan bonds.<\/p>\n<p>Last week, the company missed coupon payments on two U.S. dollar-denominated bonds, according to Reuters.<\/p>\n<p>Country Garden&#8217;s U.S. dollar bonds account for just under half of outstanding high-yield U.S. dollar-denominated bonds, according to Goldman Sachs analysis.<\/p>\n<p>China U.S. dollar bonds that are of investment grade account for 43% of the total, the analysis showed.<\/p>\n<p>&#8220;Given that the majority of [high-yield] developers have either defaulted or conducted bond exchanges, we believe rising stresses amongst the remaining [high yield] developers are unlikely to have broader impact on the offshore bond market,&#8221; the Goldman analysts said in a report Friday.<\/p>\n<p>&#8220;We believe of greater concern is whether rising stresses will spillover to [investment grade] developers, most of whom are state owned enterprises [SOEs].&#8221;<\/p>\n<\/div>\n<blockquote data-test=\"Pullquote\">\n<div class=\"Pullquote-pullquote\" style=\"border-top-color:#002f6c\">\n<div>\n<p>The more the government tries to help the real estate industry, the longer it takes for the industry to find a reasonable bottom.<\/p>\n<div class=\"Pullquote-sourceWrapper\">\n<p>Louis Lau<\/p>\n<p>Brandes Investment Partners<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/blockquote>\n<div class=\"group\">\n<p>State-owned companies have generally found it easier to obtain loans in China, where state-owned banks dominate. State-owned developers have also fared better in terms of recent sales than non-state-owned developers, data show.<\/p>\n<p>However, China&#8217;s entire real estate sector still needs to contract by about 10 percentage points to reach a similar level of GDP contribution as Japan or South Korea, said Louis Lau, director of investments and emerging markets portfolio manager at Brandes Investment Partners.<\/p>\n<p>He pointed out that while real estate has contributed to about 30% of GDP in China, that share is in the lower 20 percentage points in South Korea and Japan.<\/p>\n<\/div>\n<div class=\"group\">\n<div class=\"RelatedContent-relatedContent\" id=\"RegularArticle-RelatedContent-1\">\n<div class=\"RelatedContent-container\">\n<div class=\"RelatedContent-nonCollapsibleContent\">\n<h2 class=\"RelatedContent-header\">Read more about China from CNBC Pro<\/h2>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"group\">\n<p>In 2020, Beijing began an earnest crackdown on developers&#8217; high reliance on debt for growth. Authorities have eased their stance in recent months, with a notable shift in late July, but stopped short of large-scale stimulus.<\/p>\n<p>&#8220;The more the government tries to help the real estate industry, the longer it takes for the industry to find a reasonable bottom,&#8221; Lau said.<\/p>\n<p>He is underweight China, with selective investments in some consumer names and industries he expects will outperform.<\/p>\n<\/div>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.cnbc.com\/2023\/08\/14\/china-economy-new-loans-fall-property-fears-low-consumer-sentiment-.html\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>BEIJING \u2013 China&#8217;s economy is running into more challenges. Credit data for July released Friday showed a slump in demand from businesses and households to borrow money for the future. Real estate problems persist with once-healthy developer Country Garden now on the brink of default. Consumer sentiment is weak. &#8220;The weak July credit data suggest<\/p>\n","protected":false},"author":1,"featured_media":11556,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[43],"tags":[],"class_list":{"0":"post-11555","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-news"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.12 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>China&#039;s economic challenges gather steam as new loans plunge, property fears loom | iSafeSpend<\/title>\n<meta name=\"description\" content=\"BEIJING \u2013 China&#039;s economy is running into more challenges.Credit data for July released Friday showed a slump in demand from businesses and households to\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link 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