Next Week in China: 2-6 December 2024

Major Data Releases:

• 2 December: Caixin to report November Manufacturing Purchasing Managers’ Index (PMI) for China
• 3 December: Hong Kong to report third quarter data on port container and shipping volumes
• 4 December: Caixin to report November Services PMI for China
• 5 December: Taiwan to report November consumer price index (CPI) and producer price index (PPI)
• 6 December: Macau to report Residential Property Price Index data for August to October
• 7 December: China to report level of foreign exchange and gold reserves for November 

Next week will be quiet, as far as macroeconomic indicators are concerned, with only two major data releases scheduled for Mainland China. 

Heading into December, let us take a moment to review economic developments between January to October. Over this period, the growth rate of industrial profits continued to decline, slipping from -3.5 per cent in the first nine months to a further decline of -4.3 per cent. However, the monthly decline has narrowed significantly, from -27 per cent in September to -10 per cent in October. Breaking down the volume and price components, the seasonally adjusted profit margin increased from 4.7 per cent in September to 5.3 per cent in October. Meanwhile, the revenue growth of industrial firms showed some improvement from zero in September to 0.2 per cent the following month, but still suggesting that demand remains weak. Additionally, the year-on-year PPI for October slightly worsened from -2.8 per cent to -2.9 per cent, and this rise in producer prices has constrained the recovery of corporate profits. From a structural perspective, profit growth for middle and downstream industries showed some recovery, partly driven by a rebound in exports growth. Conversely, the profit decline in upstream industries further widened heading into October.

Looking ahead, recent high-frequency data indicate a seasonal slowdown in production and construction activities since November, while the positive effect of home appliance trade-in incentives on retail sales has diminished. Following a brief spike in real estate transactions, market movements have become mixed. Attaining a sustained recovery in domestic demand will depend on two key factors: the continued momentum of fiscal stimulus measures and the stabilization of the domestic property market. Additionally, speculation about additional tariffs on Chinese goods in the United States has led to rising export container freight rates compared to previous months. This may trigger producers to rush exporting their goods, similar to what occurred between the third quarter of 2017 and the first quarter of 2018 when China’s exports to the US grew significantly faster than exports to other countries also due to then-President Donald Trump’s tariff war against Beijing. This situation could potentially boost profits for export-oriented businesses towards the end of the year ahead of Trump’s return to the White House on 20 January 2025.

For Chinese stocks, the MSCI China Index had increased by 0.36 per cent week-on-week as of Thursday, 28 November. Meanwhile, the Shanghai Composite Index rose by 0.87 per cent from last Friday’s close, the Shenzhen Component Index fell by 0.06 per cent, and the ChiNext Index decreased by 0.27 per cent. In terms of market capitalization, small-cap stocks performed slightly better than mid-cap and large-cap stocks this week. From a style perspective, growth stocks slightly outpaced value stocks.

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.