China’s economic slowdown shows no signs of ending


So far, the central bank and governments are keeping a tight rein on large-scale stimulus
Newsfeed26 Nov 2021
    Photo credit: AFP Photo


    MAINLAND CHINA & HONG KONG

    China’s economy continued to slow in November with car and homes sales dropping again as the housing market crisis dragged on.

    That is the outlook from Bloomberg’s aggregate index of eight early indicators for this month. While the overall number stayed unchanged, under the surface there was a further deterioration in some of the real time economic data.

    New export orders for smaller manufacturers in China jumped in the month, according to a survey of more than 500 firms. Export-focused companies in the survey also said they expect faster sales, output, and new orders in the next three months.

    The central government this week (ending 26 November) again called on local governments to sell bonds faster and use the money to boost infrastructure investment as a way to support growth. Iron ore prices have risen in recent days on expectations of a rebound in steel demand and output in the rest of the year, but local governments have struggled to find good projects to spend their money on this year.

    So far, the central bank and governments are keeping a tight rein on any large-scale stimulus or extra spending.

    The official producer price index in October rose at the fastest pace since July 1995, and while that boosts the profits of energy producers and some other firms, it cuts into the margins of other companies and also led to power shortages earlier in the year. – Bloomberg News.

    On Thursday (25 November), the Hang Seng Index gained 0.22% to 24,470.16 while the Shanghai Composite Index fell 0.24% to 3,584.18.

     

    REST OF ASIA

    Bank of Korea (BOK) Governor Lee Ju-yeol said interest rates are still accommodative after two hikes since August, suggesting further tightening is in the pipeline as inflation risks mount in the recovering economy.

    The board considered the price pressures building in the economy and financial imbalances when it decided to raise rates by 25 bps to 1% on Thursday (25 November), Lee said at a press briefing. The central bank revised up its inflation outlook to 2.3% for this year and 2% for 2022, expecting price gains will exceed, or at least hover around, its target through next year.

    Central banks worldwide are grappling with price pressures that threaten to destabilise their economies’ recovery from the pandemic. New Zealand on Wednesday signalled aggressive tightening ahead after hiking for the second time in two months, while surging US prices are pressuring the Federal Reserve to pivot more quickly to tightening. 

    Lee referred to global supply bottlenecks and rising inflation expectations among the Korean public as factors that could fuel further price gains in the economy. The Federal Reserve’s policy moves will be an important consideration for the BOK, but domestic conditions will take priority, the governor said. – Bloomberg News.

    South Korea’s Kospi Index slipped 0.45% to 2,966.92 in early Friday trading. It closed 0.47% lower at 2,980.27 the previous session.

    Australia’s S&P/ASX 200 Index lost 0.46% to 7,373.50 on Friday morning, after adding 0.11% to 7,407.30 the previous session.

    The Taiwan Stock Exchange Weighted Index inched 0.07% higher to 17,654.19.

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