Next Week in China: 16-20 December 2024

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Major Data Releases:

16 December: China’s National Bureau of Statistics to hold press conference on economic situation
16 December: China to conduct Medium-term Lending Facility (MLF) operations and set December MLF rate
16 December: China to report November industrial production levels
16 December: China to report November energy production volume
16 December: China to report total investments in fixed assets (excluding rural households) for November
16 December: China to report investments in real estate development made in November
16 December: China to report November data on total retail sales of consumer goods
16 December: China to report November commercial housing price index
20 December: China to report December 1-year and 5-year loan prime rates (LPR)

Next week will see multiple economic data releases in China.

The Chinese Communist Party’s Politburo – the highest decision-making body in Mainland – held a meeting on Monday, 9 December which sparked speculations that Beijing is likely to implement more interest rate cuts, increase the government’s borrowing limit, and take additional steps to stabilize the struggling property market in 2025. The Politburo’s proposal for a “more proactive fiscal policy” exceeded market expectations and suggest that they may further expand the deficit and continue the issuance of special treasury bonds. Both are aimed at boosting domestic demand amid heightened global market uncertainty.

Regarding the total retail sales, we expect the November reading to show a year-on-year increase of around 4.9 per cent, maintaining a level similar to October. The effectiveness of the trade-in policy for consumer goods continues, with automobile purchases increasing by 4 per cent compared to the previous month. This rise helps offset the advance consumption effect from the 11.11 shopping festival, one of the biggest e-commerce events of the year, keeping November’s retail figures steady.

In terms of investment in fixed assets, we anticipate that from January to November 2024, fixed asset investment will grow by around 3.6 per cent year-on-year, up 0.2 percentage points from the January-October period. This is driven by ongoing large-scale equipment upgrades and the impact of consumer goods trade-in policies. Between January to October, purchases of equipment and tools rose by 16.1 per cent year-on-year, 12.7 percentage points above the overall investment figure, while manufacturing investment grew by 5.9 percentage points to expand by 9.3 per cent year-on-year. Furthermore, recent data suggest a rebound in infrastructure and real estate investment growth rates, potentially driving future growth. From January to October, real estate investment growth improved in all areas except in the eastern region. Infrastructure investment increased by 4.3 per cent year-on-year, up 0.2 percentage points from January to September.

Equities fared better week-on-week. As of Thursday, 12 December, the MSCI China Index had increased by 2.72 per cent for the week. Meanwhile, the Shanghai Composite Index rose by 1.69 per cent, the Shenzhen Component Index gained 1.54 per cent, while the ChiNext Index declined by 1.11 per cent. In terms of market capitalization, small and mid-cap stocks continued to outperform large-cap stocks this week. Meanwhile, value stocks remained favored over growth stocks during this period. Following the Politburo meeting that signaled the most ambitious stimulus efforts in years, China may increase its budget deficit to 3.5-4 per cent of GDP, surpassing the previous 3 per cent threshold. This could potentially set the stage for a stock market rally.

This piece has been co-produced with Yiyi Capital Limited in Hong Kong, a China specialist and a part of a global financial services group.