Insight

Soaring consumer confidence boosts China’s long-term growth prospects

Soaring consumer confidence boosts China’s long-term growth prospects

China’s 75th National Day Golden Week holiday, which ran from Oct 1–7, has seen positive momentum in domestic travel, consumption and property sales, according to preliminary data.

The positive sentiment follows the recent announcement of an exciting stimulus package by the Chinese authorities. The National Development and Reform Commission (NDRC) yesterday also affirmed the growth message and brought forward a 100 billion yuan ($14billion) investment ahead of its original schedule.1

We believe that NDRC’s further confirmation, together with the recently announced supportive monetary and fiscal policies, will bolster the economy. This reinforces our long-term positive outlook on Chinese equities.

Travel, property and consumer data point to upbeat sentiment

The recent National Day holiday saw strong consumer activity and domestic consumption.

On Oct 6, the nationwide passenger throughput was up 5.2% year-on-year (yoy) or 24.8% above comparable period in 2019.2 The Ministry of Transportation has estimated a total of 1.94bn person times during the Golden Week with average daily throughput at 277m.

There is also good news coming from the property sector. During the Golden Week, new home pre sales in key cities aggregate was up 15-20% yoy 3, reflecting a significant improvement in sentiment. 

On the consumer sector, according to a major mobile payment operator in China, spending on the platform was up approximately 120% yoy during the first four days of the holiday4.

High-quality growth paves way for long-term development of China

Following the “Golden Week”, the NDRC held a conference yesterday, to reiterate the policies to solidly promote the long-term upward economic development of China.

The conference confirmed that China will issue ultra-long sovereign bonds next year to support major projects and bring forward a 100 billion yuan ($14billion) investment on key strategic areas ahead of its original schedule. 

During the conference, the top 5 priorities have been reiterated5

  1. Lifting macro backdrop
  2. Expanding domestic demand
  3. Support for enterprises
  4. Stabilise the real-estate market
  5. Boost capital markets

We are confident that the implementation of policies supporting enterprises, the labor market, the capital market, and the property market will significantly bolster China's long-term growth.

Looking Ahead: Embracing Future Opportunities

Recent policy easing announcements have revived optimism. We are pleased to see the upbeat consumer sentiment during the Golden Week, and we believe the supportive monetary and fiscal measures will continue to boost the sustainable growth of the Chinese economy.

Looking ahead, we continue to look into four major themes in China's economic landscape, including Chinese companies expanding overseas (Go Global), green transition and electrification (Go Green), AI technology advancements (Go AI/IT), and Chinese companies with dividend growth (Go Dividend Growth).

  • Go Global: Chinese companies benefit from reorganization of global supply chain, expanding their global footprint, capturing both domestic and overseas market.
  • Go Green: China’s green supply chain is growing and well structured, particularly in raw materials, grid investments, battery and EV.
  • Go AI/IT: China is gaining self-sustainable technological advancement with substantial investments and applications in AI and IT.
  • Go Dividend Growth: Chinese companies with strong cash flow companies have high potential growth in dividend and share buyback.

Reference:

  • 1

    Source: National Development and Reform Commission, as of Oct 8, 2024 

  • 2

    Source: Citi, as of Oct 7, 2024

  • 3

    Source: Citi, as of Oct 7, 2024

  • 4

    Source: China Daily, as of Oct 8, 2024

  • 5

    Source: Macquarie, as of Oct 8, 2024

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The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

When investing in less developed countries, you should be prepared to accept significantly large fluctuations in value.

Investment in certain securities listed in China can involve significant regulatory constraints that may affect liquidity and/or investment performance.

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