When I added Alibaba (BABA) to my Jubak’s Picks Portfolio on April 29, 2022, and Tencent Holdings (TCEHY) to my Volatility Portfolio on January 3, 2022, I thought two things were about to happen in China. First, I thought that the People’s Bank would unleash enough stimulus to more than compensate for the slowdown in China’s economy. And, second, I thought that we’d seen the end of the regulatory crackdown on China’s big entrepreneurial technology companies. I got both trends wrong.
It’s China’s worst heat wave in six decades. And it’s led to factory shutdowns as officials work to conserve electricity. In Sichuan province, for example, factories in more than 19 cities have halted operation until Saturday in order to save electricity. This isn’t exactly what a country needs that has just reported slower-than-expected growth
China’s factory output and consumer spending both slowed in July, new numbers released today by the National Bureau of Statistics showed. Industrial production rose 3.8% from a year ago. That’s lower than June’s 3.9% year-over-year rate and below economists’ forecast of a 4.3% increase. Retail sales growth slowed to 2.7% in July, lower than economists’ projection of 4.9%.
Besides being scary, the Chinese reaction to Pelosi’s trip to Taiwan shows how bad China’s economy is
What intrigues me about the current Taiwan crisis set off by House Speaker Nancy Pelosi’s trip to Taiwan is what it suggests about the state of China’s economy. I can’t help thinking that a confrontation with foreign enemies is the precise strategy followed by so many regimes that see themselves in trouble on the domestic front.
China’s economy grew at just a 0.4% rate in the June quarter. Thanks to a Pandemic lockdown that covered 350 million people, China’s GDP grew at the second lowest rate ever recorded. The numbers mean that China will miss its GDP growth target of 5.5% a year by a big margin. Goldman Sachs cut its forecast to 3.3% growth for the year.
The People’s Bank of China slashed its daily short-term liquidity operation to 3 billion yuan ($447 million) this week, the smallest amount since January 2021. At this pace, it’s likely to remove more cash in the first five days of July than it injected at the end of June. At the current rate, the People’s Bank would drain a net 428 billion yuan ($64 billion) of cash in the first five days of July, more than the 400 billion it injected at the end of June. The move looks like an effort to “normalize” China’s financial markets after a period when the People’s Bank added cash to the system in an effort to lower interest rates and increase lending in order to stimulate economic growth after Pandemic lockdowns crushed China’s economy. And to bring monetary policy at China’s central bank in line with that at other central banks that are raising interest rates. Efforts to drain liquidity from the financial system are never good for China’s stock market.
Industrial output unexpectedly fell 2.9% in April from April 2021, China’s National Bureau of Statistics reported today. Retail sales contracted 11.1%. Economists had projected a 6.6% drop. The unemployment rate climbed to 6.1% and the youth jobless rate hit a record. Monday’s data suggests China’s gross domestic product declined 0.68% in April from a year ago, the first contraction since February 2020,
The Chinese government has promised more stimulus to prop up growth in the country’s economy and the Politburo has indicated that, at least temporarily, it will slow the pace of its regulatory crack down on China’s Internet companies. The combination, as I posted in today’s Quick Pick YouTube video, has launched a huge rally in China’s Internet and e-commerce stocks. As of 3 p.m. on Friday, April 29, the New York traded shares of Tencent Holdings (TCEHY) wee up 8.95%. JD.com (JD) hadgained 7.72%. And Ablibaba (BABA), the big name among foreign investors and the leading target of government regulators is up 8.26%. On this trend, I’m adding shares of Alibaba to my JubakPicks Portfolio today
China’s President Xi Jinping has vowed to boost China’s economy, struggling under the impact of widespread Covid-19 lockdowns and a collapse in the property development sector, by pushing more infrastructure spending into the economy. This has been China’s tried and true first response to faltering growth. But this time it seems unlikely to work.
China expanded coronavirus testing to most of Beijing as rising cases fuel fears about an unprecedented lockdown of the capital. Officials on Monday night said testing would take place in another 11 of Beijing’s 16 districts, moving beyond just Chaoyang, where most of the infections have been detected since Friday. The city of more than 20 million people has already locked down parts of the eastern district of Chaoyang, home to 3.5 million people, with plans to ease restrictions after residents complete a testing regimen on April 27. The bad news from Beijing added to new bad news from a locked down Shanghai
Forget about all the hoopla over Tesla (TSLA) founder Elon Musk’s bid to buy Twitter (TWTR). (If you can.) On Wednesday, when the electric car leader announces first quarter 2022 earnings the story will be China, China, China.
China’s Premier Li Keqiang issued a third warning about risks to economic growth. Authorities should “add a sense of urgency” when implementing existing policies, Li told local authorities at a seminar Monday. China will study and adopt stronger economic policies as needed to support the economy, he said.