China Stimulus No Surprises Except Size
China's $586bn stimulus package shows that Beijing is on top of the economy and knows that a larger than expected dose, delivered earlier than the consensus expected, is what is needed. This is designed to slow the slowdown, largely by propping up investment as well as consumer confidence so that the strongest part of the economy, retail spending, does not collapse. It cannot stop the slowdown altogether as external events are well beyond its control.
There are no major surprises. We won't outline all the details here. Doubtless you have received them many times over. Monetary policy will play an even greater role if easing continues as we expect.
The clear beneficiaries (not surprisingly) will be infrastructure spending, implying that the future for steel, cement and machinery will be better/less bad than the consensus has believed.
Not much can be done for mid to high-end private property by stimulus (nor shd it be). We expect further policy measures to expand those announced earlier.
What is new is the development of economy housing, which we believe will expand much more than people expect. Eventually 20% of the population could be in Singapore HDB-like projects, with 15-20% of housing starts from 2008 being in this sector compared with just 6% last year. Most are 6-10 storey apartments - very steel intensive. Hafidzah Hassan will comment separately on these measures when she gets off a plane for our Property & Steel Workshop that, in very timely fashion, starts today.
Ahead of the Washington global meeting China has clearly laid out its stance. Ahead of others it has signalled the domestic stimulus package that has been under consideration since the second quarter. So it is well advanced and ready to go, unlike most other countries.
With the measures laid out, Beijing can move on at the economic policy meetings over the next month to put flesh on the bones by detailing policies and implementation. Cash-strapped local governments, who typically get 25-33% if not more of their revenue from property related activities, will not need much encouragement to spend once given the green light by Beijing.
China will look after itself first. So far the only beneficiaries of Chinese assistance have been some of the stans in the FSU (key raw material suppliers). As things become clearer China may play more of a global role but its stated plan is to support world growth by ensuring that Chinese growth does not collapse. That is the context of these measures that account for 14% of GDP.
Market: The market may rally short term but the key factor is the OECD over the next six to 12 months. Until there is a consensus of how deep and how long the OECD recession will be we do not believe that China's markets can sustain a strong rebound. |
发表于 2008-11-10 15:53
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