China is not going to crash, China has seen a slowing world economy and is retracting growth to a sustainable level, that level will be about 6%.
China’s leaders give every impression that they value stability more highly than reform. Yet confidence in their ability to manage a complex transition in the world’s second-largest economy without a severe slowdown has suffered a blow. Greater economic freedom might be welcome in the long run. But few proponents of reform – inside or outside China – seem willing to accept the short-term costs.
Building
China’s constructing materials division stayed sluggish on the back of weak property market, manly represented by Cement’s output’s 4.7 percent drop y-o-y to 1.7 billion tons in the first nine months.
In particular, the underwhelming figures came as the property segment, a top consumer of cement and flat glass, is affected by a nationwide supply glut, especially in third-tiered cities.
Meanwhile, Housing investment grew 2.6 percent y-o-y over the first three quarters, falling 0.9 percentage point from the first eight months and down 2 percentage points from the first six months.
Rising vacancy rates and plummeting rents are increasingly common in Chinese malls and department stores, despite official data showing a sharp rebound in retail sales that helped the world’s second-largest economy beat expectations in the third quarter.
The answer to that apparent contradiction lies in the rising competition from online shopping and government purchases possibly boosting retail statistics. Add poorly managed properties into the equation and the empty malls aren’t much of a surprise.
More importantly, the struggles of Chinese brick-and-mortar retailers amplify a policy conundrum; these malls, built to reap gains from rising consumption, are instead adding to China’s corporate debt problem, currently at 160 percent of GDP – twice as high as the United States.
Steel
Values of China’s steel yields declined in September in spite of falling output, stressing the ongoing problems to digest supplies in the bloated sector.
Based on the National Development and Reform Commission’s data; crude steel production fell 2.1 percent y-o-y to 608.9 million tons in the 9 months to Sept.
China has been struggling to handle yield gluts from an investment boom laid by big aids in the past few years that saw producers in favored sectors grow rapidly.
However, to overcome this issue, the government has forbidden new projects in steel, cement, electrolytic aluminum, flat glass and shipbuilding before 2017.
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