Chinese Economy Grows Faster Than Expected

Official figures from the Chinese National Bureau of Statistics have confirmed that China’s gross domestic product (GDP) grew faster than expected in the first 3 months of 2024.

GDP was 5.3% pa for quarter 1 when many market commentators were expecting around 4.5% - 4.7% pa.  The Chinese government does have a growth target of 5.0% pa, so government stimulus does appear to be having its desired effect.

We are know that the Chinese economy has been having serious problems with property and property firms with property giant Evergrande being issued a Hong Kong court order to wind up operations in January with $300bn of debts and only $240 billion in assets.  A $60 billion debt is huge when you think that during the credit crunch crisis of 2008, Royal Bank of Scotand was bailed out with the biggest coprorate losses in UK history to the tune of £45 billion, so Evergrande is on a similar scale.  Ass to this, Evergrande rivals Country Garden and Shimau have also been issued with wind up notices.

It could get worse with Chinese property prices falling at their fastest rate in 8 years in March.

Comment

Do not be fooled by this larger than expected growth and then the Shanghai Composite stock exchange leaping 1.52% this week on the news.  This is not going to be easy for the Chinese government.  Stimulus has helped but if the Chinese consumer is cautious and not spending money then government stimulus interventuion will not protect the economy that we have all become so accustomed to have 8-10% growth pa.

We are neutral in the short term for investing in China and Hong Kong but we do see an opportunity in the medium term given we are talking about the world’s secong largest economy with the Shanghai Composite some 10.33% off its year high and 49.95% off its all time high.  The sam can be said for the Hang Seng in Hong Kong closing today at 20.38% below its year high and 51.17% off its record high.