What do you think. You have your terminal. I've been writing to. Yes indeed.
The GDP gross is a big mess but we always know there is margin over uncertainty. Let's put it that way. I around such number.
But this number basically means you know this year something 5 percent growth is out of water 4 percent still very challenging.
You need a very very strong recovery in the second half to hit 4 4 this year. Did we get that because of pent up demand and the
like. Do you think it's feasible or do you think that this number really kicks those targets out of the park entirely. To
us the most important factor outside of that zero Covid situation is actually the housing. As you actually already
mentioned the housing right now is in a pretty dire situation. And if we don't have a strong recovery in housing sales from
here onwards yeah that starts kind of your challenge. That seems to be well I wouldn't say completely out of control because
there are things that they can do and now maybe they can even take over some of these projects. Right. But that's a very big
exercise to undertake. Right. And what do you make of this. Let's start with the mortgage situation. Well that just
highlights you know that the housing was already in a very bad place even before the Shanghai locked down. Right. The
developers already in you know very big a cash flow problem. Right.
And everything you know they're locked down. Just made it worse because it really hurt the household confidence.
And that's something hard to control for the government. Again and we look here you know residential property sales down thirty
one point eight percent. We're looking at six to study. We're looking at also property investment year to date year on year.
We're looking for contracts that will point to percent were even worse than that. You know read of mine is five point four
percent here too. Yeah. That goes to what you're talking about. Yes indeed. I mean so far they have saw a lot of money at the
infrastructure. Right. That's easy to come back. That's always you know less about concern. But if you only have
infrastructure it's not enough. You need housing to really turn the economy around. But housing is not something the government
can fully control because there is the household confidence here which is reading being hurt by the entire situation. So so
basically we need a lot more steel a lot more support from the government to to to improve the housing sector. In what form
with that time. I think a few days ago just this week the PBS he held that that first half briefing. Right. And they said the
equity ample. And you look at interbank rates. They're not wrong. They're very very true. So how do we get that to where
it's needed. OK. Having the housing problem is some sort of part of the long term structural issue of too much debt. Right.
So essentially to really get out of the situation China needs a proper debt restructuring of the sector of the banking you know
so. So they need to clean up because if you have all these debts issue defaulting lingering in the background things cannot move
ahead. Well this is it isn't it. I mean would anybody want to buy our house at the moment if you've got a declining market. I
mean it's the same as deflation. You don't buy today. You wait for it to go down further. That's the thing. Because there's so
much noise there. And as you say it's important because it's about 25 27 percent of GDP. Yes. It's not just declining markets
that you you pay for something. You will get it. That's even worse. That's right. So so the concern here is we get a vicious
circle. You know households their confidence get ahead and they don't they don't pay. They stopped buying on or even you know
cut down the buying of presale properties. And that hurts the developers even more. So you can see how how that goes. But
let's see. I think the government realized the gravity of the situation and they're trying to take some action. Let's look at
the drivers of course that we have so far the trade numbers this week. I mean one hundred billion is the surplus already here
today. That's up. That's a big surplus. What does that mean for the currency and what engine of growth is that provided enough
to take 3 and a half percent growth target and a half percent growth. Right. So the trade has been super helpful so far. And
the fact that you know we've got another month of strong export growth just showed you know there's almost no lasting disruption
to the global supply chain from China. And but but that also highlights the challenging the second half
because it means the girls do very much rely on the external demand. But we all know the external demand. I guess it's a
consensus now is going to slow down quite significantly because all the energy issue and other issues and monetary policy
tightening the West. So that means that domestic demand is to step up even more to fill the gap here. Right. And we have some
some positive signs here but that is not enough. And again back to the point that a company to provide more support. We saw what
they were doing just about a week ago where they were trying to borrow money in order to shore up these municipal authorities
because they are having a real shortfall because of the property market. They can't sell land which is one of their main revenue
generators. I mean how bad is the debt situation. Actually we take everything into consider. Oration.
It's it's it's no good. I said it's definitely not good. We we've known this problem for a long time. You know housing
leverage to high infrastructure local governments leverage too high. Before the pandemic hit the government was almost on a
good path to start addressing this issue. But a pandemic that disrupted the whole thing. And now they have to use leverage
again to support the economy. So you know as I mentioned earlier I think at this point actually that's restructuring bank
recapitalization maybe as important as stimulus to the economy. And where do they get the funding for the. The aggregate
financing numbers that we got just for June yet a very big bump in government bonds. Yes. Is that. Does that continue. Is that
where they're going to get funding apart from of course the special governments which is out.
That helps. But to our mind we think actually what's needed even more here is for the central government to step up. They need to
leverage up the central balance sheet. You look at the central government debt. CBS is only 20 percent of the economy. It's
actually pretty low. They have scope here. And you know the point about local governments you know they have their fiscal
position are we can so much but zero Covid lockdowns. So so central comes me to make me do tipping and things like
especially issuing special Seabees or even expanding the budget deficit. We think it could be quite likely in the second half
given you know the pressure on the growth. Very final question. I guess on that note have we seen from mid-year up until the end
of the year have we seen them change their tack on what the budget deficit targets going to be. Have we seen them change
their official forecast. I can't seem to remember the last time that they've changed the target that they set in March. Yeah I'm
with you. I've never. I don't think there was a case before. OK. That shows you know there is a lot of kind of ingrained fiscal
conservatism from the central government side. They need to overcome the hesitation. But again if the pressure on the
economy builds up further I think the hesitation would melt if there's a time for that. As you point out it's probably no way.
Thank you so much.