China Shares Rise On The Back Of Positive Economic Data

After a long period of stagnation and recent fears of the Evergrande situation developing into a full-scale crisis, share values in China are rising on the back of positive economic news. The country’s National Bureau of Statistics reported that the nation’s output grew by 8.1 per cent in 2021 and that it increased by more than 4 per cent in Q4 alone, beating the market’s estimates.

The world’s second-largest economy grew 0.55 % more than economists were predicting.

It wasn’t all good news, though…

While industrial production rose, China’s domestic demand remained weak. Retail sales grew slightly, but considerably below analysts’ expectations.

China still remains highly dependent on demand for its exports.

Policy Issues

While China’s stock market value rose due to the positive economic data, the country continues to implement policies that concern investors.

Additional lockdowns to contain the spread of omicron, for instance, have been making their effects felt, as well as difficulties in the property sector and trouble on the high street.

Analysts suggest that China requires more policy support. If domestic consumption is to rise and push up the price of stocks, then the current economic situation must change.

Chinese authorities need to find a way to switch private spending away from property investments and over to real goods and services produced domestically.

Lowered Interest Rates

China’s central bank is trying to do its bit to stimulate demand.

This year, the People’s Bank of China cut interest rates to the lowest level since the start of the pandemic, affecting around $110 billion worth of loans issued in the country.

Rates will fall to 2.85 per cent, down 10 basis points, to support demand and recovery of SOEs and the private sector.

This recent larger-than-expected cut suggests that policymakers are worried about future growth prospects.

While China’s economy is bouncing back, the country’s zero-tolerance policy towards COVID-19 is likely to hamper its economic prospects going forward.

Other Markets

Other Asia-Pacific markets have seen mixed trading. The Japanese Nikkei 225 saw a 0.72 per cent gain, while the Topix was up 0.46 per cent. South Korean shares fell, with the Kospi losing 1.19 per cent.