Let's bring along to our head of Asia economics and chief China economist at
UBS to talk us through just over the whole reopening story in China, which
obviously the market has hit the pause button on just the prospects of this.
But just given the data that we've seen from the Lunar New Year, what does this
tell you about the recovery now? Long tail?
Hi, good morning. Yes, I think that China's recovery is
well underway. So we have been monitoring high
frequency data such as the subway traffic, passenger traffic.
Also urban traffic congestion in DAX. We're looking at doing the Chinese New
Year, the travel and tourism. So everything is up related to consumer
activities. Of course, they are still weaker
compared to 20, 19, but they are significantly up from last year.
And of course, also in general, I think just excluding the holiday period
activities in January is also stronger than in December.
So I think the recovery definitely is on the way.
But because of the holiday, a fact. But also, I think some remaining
cautions among consumers. I think the rebound initially will not
be super strong, as some people expect. And the market, of course, has already
reflected quite a bit of that. Yeah.
And they've also, to your point, until they've sniffed out that it's not going
to be rising at the same rate. Can you tell us a little bit more about
the data then? So there was a pickup in recovery.
What areas picked up for faster than others and what what lagged
areas that makes up? You need to see it is related to travel.
We have also done some evidence left survey.
We checked consumers before the Chinese New Year about their intention to
travel. So indeed, I think we can see that more
people wants to travel to see friends and also to enjoy holidays compared to
before. But I think people are still a bit
concerned about re infection or, you know, people who have not been infected.
They are a bit afraid. So in terms of the spending, the
expected increase is not that high during the Chinese New Year, but
expectations for spending more during the rest of the year is high and people
expect their income to grow by 7 to 8 percent this year, whereas last year the
income growth was about 3 percent. So there is definitely that expectation
and that kind of pickup in terms of the subway traffic on the on the tour for
the 18 big cities that we have data. Things have really come up multiples
compared to a December average. But again, it's still below the 2019
level. So, yes.
And in terms of the travel and tourism doing the Chinese New Year, in terms of
the number of people, it's up 80. It's up significantly compared to last
year, but it's about 80 percent of 2019 level and spending is about to 80
percent of 2000, 19 level. So you can see, you know, on one hand
there is a pickup. In the other hand, there is some sign,
some gap, but pretty close to getting back to a true pandemic.
It seems to want to have just one eye when it comes to then.
You know, the macro picture. Yes, there's a reopening story.
There's also a Federal Reserve that is slowing down the pace of their rate
hikes as well. Does that mean.
What does it mean for China's need for stimulus?
Can I still expect rate cuts this year, for example?
Thank you. Turn a student, this probably is on the
way, but may not reflect in MLS policy rate cut, but the central bank or the
government has already guided mortgage rates lower.
So a lot of cities now have mortgage rates in the 3 percent plus range down
from full plus percent. So how to get corporate and household
borrow is a very important issue, important goal for the government.
So we expect to actually add more fiscal support and also more sort of credit
support, including to the property sector.
I think that that is key. So I think in the first few weeks of the
of January, of course, property sales is relatively weak because there's also a
Chinese new year. And stabilizing property is I think it's
very important. And, of course, continue to support
infrastructure investment. These are some of the policy areas where
we're going to see those who may mainly through credit policy, lower mortgage
rates and also more bond issuance and bigger fiscal deficit.