China Economy, Housing & Lumber Shipments
Economic activity in China appears to have slowed further during the month of May, although the moderation in growth continues to occur at a gradual pace – keeping concerns of a hard-landing at bay. Nevertheless, hopes of a meaningful acceleration in growth this year have faded, and expectations are now for growth to stabilise at sub-8% levels. As a result of the slower than expected growth, most analysts have reduced growth forecasts for 2013 last month to 7¾% (from 8% previously) – although even softer growth remains a possibility. Authorities appear content with slower rates of growth suggesting that monetary policy will remain unchanged until at least next year. However, there has been a noticeable tightening of liquidity conditions leading up to the national holiday, and following a clamp down on capital inflows.
Industrial production growth ebbed slightly lower in May to 9.2%, which is well below the long run average. Taken together with softer growth in the services sector – as indicated by the non-manufacturing PMI index – that implies that GDP growth for the June quarter may not improve from the disappointing rate (7.7%) recorded in the March quarter. Manufacturing PMI’s show that small and medium sized manufacturers came under renewed pressures with the HSBC PMI – which is more representative of these firms – dipping below 50 to 49.2 (from 50.4). In contrast, the official PMI index – which is more representative of larger and state owned firms – improved marginally to 50.8 (from 50.6).
Export growth also slowed significantly in May, although this was partly expected following the governments recent crackdown on the misreporting of exports to disguise unapproved capital inflows. Merchandise exports declined 8.2% (seasonally adjusted) in May, to be just 1% higher over the year. With headwinds from weak
external demand and an appreciating exchange rate, this outcome probably more accurately represents conditions facing Chinese exporters. The decline in the month was largely driven by sharp falls in exports to trading partners such as Hong Kong and Taiwan, where exports were thought to be the most ‘inflated’ to cover-up hot money inflows. Exports of both machinery and high-tech goods declined in the month. Reflecting the weakness in domestic demand, imports declined 8.6% in May to be 0.1% lower over the year. Given the decline in imports from the previous month, the trade balance jumped in May to US$20.4bn. Trade conditions are expected to improve this year, although the mixed economic indicators out of many major economies suggest that headwinds remain. Export orders improved marginally in May, but remain at levels that suggest a contraction in exports in coming months. Recent strong appreciation is also expected to have a negative impact on exports over coming months.
The Property/Construction Market
The government is not likely to release new tightening policies in the short-term to curb property prices, JP Morgan’s chief China economist Zhu Haibin said Wednesday.
He said that given the faltering economic recovery and varied regional conditions, the possibility for the central government to release new tightening policies targeting the property market remains low. It is more likely that local governments will work out their own property policies, with adjustments related to limited property sales and mortgage rates in cities with rising house prices, he added.
Sixty-five out of a statistical pool of 70 major Chinese cities saw new home prices increase month-on-month in May, down from 67 cities in April, according to theNational Bureau of Statistics.
NBS data also showed that new home prices in 34 cities saw slower month-on-month rises compared with April. The cities of Fuzhou, Zhengzhou, Guangzhou and Chengdu saw price rises narrow by at least 0.6 percentage points. Experts attributed the slowing price rises to the effects of recent property tightening measures.
Property investment accounted for 11 percent of China’s gross domestic product in the first quarter of 2013 and it affects 40 other industries.
Chinese property sales in May increased 28 percent from a year earlier in area terms, moderating from a rise of 40 percent in April, but still keeping a robust growth pace. Total land area bought by developers fell 13.1 percent in the first five months from a year earlier, accelerating from a drop of 8.6 percent in January-April, the NBS data showed. — New home prices in China’s 288 major cities rose 9.7 percent in May from a year ago, the sixth straight year-on-year rise, according to the China Primary Home Price 288 index, which is published by a real estate services company E-House China. — A total of 3.81 million, or about 29 percent, of the existing 13.21 million homes in Beijing are unoccupied, the 21st Century Business Herald said on June 17. Source: various Chinese journals
BC softwood lumber export volume to China as of the end of April 2013 was 2.49 million cubic meters, practically equal to the same period in 2012. However, BC softwood lumber export value for this period was $437.1 million, a 35% increase over this period in 2012.