China's last throw of dice

Pendal Group

Pendal Group

China's last throw of dice? We think not. Crispin Murray, Head of Equity Strategies, travelled to China last month to assess how the economy was performing first-hand. China is Australia's largest trading partner - what happens there has significant repercussions here. There is a remarkable degree of pessimism surrounding the Chinese rate cut. Some are suggesting it indicates things are worse than expected - a desperate throw of the dice to stimulate a collapsing economy. We disagree. Service sectors - newly emerging in China - are doing better than expected. Crucially, the economy is producing more jobs per unit of GDP than it has in the past. There is however weakness in construction. Demand for new construction and prices have been falling and what really concerned Crispin was the large inventory of unsold housing, particularly in 2nd and 3rd tier cities such as Wuxi, Qingdao and Zhongshan. The interest rate cut should help, but new construction demand will remain soft. What does this mean for Australian equities and Resources stocks? Read more from Portfolio Specialist Chris Adams (VIEW LINK)


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