China economy: "Consumer demand remains rather lacklustre"

CGTN Europe

CGTN Europe interviewed Marc Ostwald, Chief Economist & Global Strategist, ADM ISI

Transcript

00:00Let's talk now to Mark Oswald, who's Chief Economist and Global Strategist at ADM Investor Services International.

00:06Good to see you again, Mark. Thanks for coming back on the programme.

00:08So what do you make of these numbers then? What do they suggest about the health of China's economy?

00:14They suggest basically it's still not, there's still not a lot of traction.

00:21But, you know, the rebound that one can see in sectors which were very vulnerable to the tariffs

00:28have clearly benefited from the trade truce.

00:33If you look at the breakdown of the services PMI, I think, or non-manufacturing PMI,

00:39more significant is the fact that basically the sectors which were doing well were all production-related

00:46and the sectors which didn't do so well, above all hospitality, were service-related.

00:54So that, or rather consumption-related.

00:57And that signals that consumer demand remains rather lacklustre, despite the incentives,

01:07which have clearly had a good effect as one we've once been able to see in the retail sales numbers

01:13for buying new-for-old products.

01:17But, you know, it's still a very patchy picture.

01:21The other data out today, in terms of land sale revenues being sharply lower, property sales also lower,

01:29underlying the fundamental problem that the property sector drag remains substantial.

01:35And it's not easy to solve.

01:38Fundamentally, it is about demographics.

01:41And, you know, there is no simple solution other than gradually trying to sort out some of the property sector's debts.

01:51Ring-fencing it, to me, still looks the best option.

01:54Given, though, that these numbers, or the data, rather, was taken under the shadow of U.S. tariffs and geopolitical tensions,

02:03how much are those things holding it back?

02:05Could they have been higher if those weren't in place?

02:07Oh, I think that's definitely true, particularly anything, you know,

02:13the production numbers could probably be a lot stronger if there weren't that threat.

02:19That said, when one looked at the last set of trade data,

02:23it was quite clear that exports outside of the United States,

02:28despite those falling more than 30%, were actually still growing very strongly, around about 11%.

02:34And that is both down to Asia, improvement in Europe.

02:38And that's good news for the Chinese economy, without its shadow of a doubt,

02:43even though missing out on some of the business that they used to do with the U.S.

02:47is obviously something of a headwind.

02:50So, you know, I think the stimulus measures, you know,

02:52they're definitely helping stabilize the economy, even give it a little bit of a boost.

02:58The big question from here really is, with some better signs in terms of growth,

03:04what do the authorities do in terms of further stimulus, both monetary and fiscal?

03:11To some extent, they may basically say, well, there's no urgency to do more,

03:17because what we've done is getting traction.

03:20On the other hand, there are indications that it probably will fade somewhat during the third quarter.

03:28So why not give it that extra boost?

03:30And that, to me, is probably the biggest question for the third quarter.

03:35Will there be a little bit of extra boost just to add a little bit of impetus?

03:42Mark, good to talk to you as always.

03:44Thank you for coming on the program.

03:46Mark Oswald there from ADM Investor Services International.

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