Golden week boomlet disappoints, Chinese equity markets resume on weaker note

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By :  ,  Financial Writer

The “Golden Week” holiday boom expected to provide momentum to Chica’s flagging services and consumer sectors was weaker than expected. Commentators warn that consumption will cool as people return to work or study and that any pent-up demand has been satiated. The World Bank’s Asia forecast said China’s economic output will grow 4.4% in 2024, down from the 4.8% expected in April, with the downgrade driven by persistent weakness of its property sector. In a contrary move, Citigroup and JP Morgan raised their China GDP growth forecasts to 5%, in line with Beijing’s official growth target.


  • Offshore Chinese yuan is back to $/CNH 7.3091 having weakened to $/CNH 7.322 last week
  • Chinese stock markets were closed for the country’s 8-day national holiday but opened lower on Monday

Key Events

Markets reopen on weaker tone

  • China’s stock market started with a bearish note – the Shanghai Composite Index closed 0.44% lower; the Shenzhen Composite Index was essentially unchanged
  • The offshore Chinese yuan was defensive at the critical point of 7.3 against a stronger US dollar, which trended above 106.5 during the Asian trading session

China’s Golden Week boomlet weaker than expected

  • Holiday performance was not as good as expected, according to traffic data and consumer spending
  • Official figures showed that a total of 826 million people, almost 60% of the population, traveled during the holiday
  • Domestic tourist revenue was 753 billion yuan in the week (over a hundred billion dollars), 130% up on last year
  • Travel was up 71.3% year-on-year, weaker than an anticipated 86%
  • Tourism revenue rose 129.5% year-on-year, weaker than an anticipated 138%
  • Per capita customer spending during the holiday was a bright spot, recovering to 97.5% of pre-pandemic levels

China’s Beige Book reports activity stalling in September

  • China’s private sector Beige Book survey reported that economic activity stalled in September: retail sales and manufacturing production were weak, pricing power declined, and loan growth all fell
  • The China Beige Book is a private data-collection network gathering real-time economic data from thousands of firms across all of China’s regions
  • Beige Book authors warn that the central government’s stated 5% growth target is unlikely to be achieved
  • Corporate borrowing fell to “very low levels,” with higher loan rejections and higher average loan rates (despite the People’s Bank of China lowering the cost of borrowing)
  • Home builders said prices fell and sales slowed. Realtors reported weaker prices despite lower mortgage rates
  • Inflation slowed in September, with its input cost, sales prices, and wage indexes all falling
  • However, “reports of China facing deflation remain exaggerated,” Beige Book authors commented
  • Commercial property’s troubles deepened, with price gains narrowing sharply and the pace of transactions sliding
  • Export order growth declined to its weakest since March

China’s PMIs signal manufacturing recovery, but services flat

  • China’s manufacturing sector expanded in September for the first time in five months, according to official data
  • The official manufacturing purchasing managers’ index (PMI) rose to 50.2 from in September, up from 49.7 in August, according to the National Bureau of Statistics (NBS)
  • Caixin’s private PMI survey also showed that China’s factory activity expanded in September, but at a slower pace, reading 50.6 in September from 51 last month
  • Caixin’s non-manufacturing (Services) PMI data for September dropped to 50.2 in September from 51.8 in August, its lowest reading since December
  • A PMI reading above 50 indicates expansion, while a lower number denotes contraction

Disappointing holiday property sales

  • Holiday period property sales were discouraging – house sales in 35 key cities were 20% less compared with sales during the 2019 holiday, according to data from an industry research firm, China Academy Index
  • It also reported that second-hand house prices in 100 Chinese cities fell steeper by 0.4% month-on-month in September, slipping for 17 months in a row

China plans to liberalize data use

  • The Cyberspace Administration of China has said no government oversight is needed for data exports if regulators haven’t stipulated that it qualifies as “important”
  • Draft regulations relieve companies of some of the difficulties with cross-border data transfer and personal information protection
  • The US-China Business Council’s recent annual survey found the second-biggest challenge for members this year was around data, personal information, and cybersecurity rules

Research by Paul Walton, Financial Writer:

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