Canada Wood Today | The Canada Wood Group

China Economic Update

Eric Wong

By Eric Wong

Managing Director, Canada Wood China

May 6, 2019

China’s economy continued to slow in 2019, with Q1 GDP growth at 6.4%, compared to 6.6% in 2018. However, the growth is slightly higher than market expectations. This is attributed to higher factory production, which has benefited from additional tax cuts, infrastructure spending, and other government fiscal stimulus.

The Caixin China General Manufacturing PMI rose to 50.8 in March 2019 from 49.9 the previous month, beating market expectations of 50.1. The latest reading was the first increase in manufacturing activity in four months and the strongest since July 2018.

 

2019 Economic Outlook

Many organizations raised their economic forecast for China in April. OECD forecasted in its recent report that China’s economic growth will be above 6% percent this year and next. The IMF raised its forecast to 6.3% from the previous 6.2%.

Yet, analysts warned it was too early to put a timetable on when there will be sustainable turnaround, adding further policy support was needed to maintain momentum in the world’s second-largest economy. Many had expected a recovery only in the second half of 2019, according to a recent Reuters report. Beijing set a 2019 economic growth target of between 6 and 6.5 percent in March.

Looking ahead, China’s economy continues to be under pressure this year. The trade conflict with the United States and related uncertainties ranked as the top risk to China’s economy, according to the Economist Intelligence Unit.

 

The Construction Sector

In March, on average home prices in 70 major Chinese cities increased, indicating a recovery in the property sector amid government controls to curb speculation and prevent an overheated market. 

Total investment in real estate increased 9.5 percent year-on-year in 2018, and continued the strong momentum in March 2019, with growth of 11.8 percent year-on-year.

However, total floor area completed in 2018 was flat (4,135 million sq. m, down 1.3% from 2017), of which 2,784 million sq. m (-0.7%) was residential.

CAD/CNY was on a downward trend in Q1 2019, compared to Q4 2018. The currency hit below five briefly on March 7th and 8th but bounced back to the level of 5 afterward.

 

China Wood Imports (cited from China Bulletin)

According to information released by Mucairen, there were 117,183 wagons of log and lumber imported from Russia to the Manzhouli port (border with Russia) in 2018, a decline of 13% over 2017.

Furthermore, there were an estimated 7,300 wagons in total for both log and lumber that arrived in Manzhouli in January 2019, a decline of 20% compared with January 2018, the lowest volume in five years.

Softwood lumber inventories at Taicang port and the surrounding area were 1.48 million cubic metres in late February 2019, up 370,000 cubic metres or 33% compared to last month. It was the second consecutive monthly increase. The inventory level of SPF was 500,000 cubic metres, a surge of 200,000 cubic metre, or 67% from last month.