00:00Xiaolin Chen is head of international at CraneShares.
00:04Domestic demand already accounts for the bulk of China's growth if you look at from 2021
00:10to 2024. Consumption alone contributed to about 56 percent of GDP growth on average during that
00:17period of time. But in recent data you can see final consumption has driven around 60 percent
00:24of the incremental growth. So higher shares than in previous five years period. To counter those
00:30external headwinds I think China is better prepared in Trump 2.0 than Trump 1.0. Policymakers are
00:38likely to keep the supporting consumptions in several ways. One like income raising reforms
00:47they are required the lower pay rates to be increased in certain cities already. They also
00:53going to help with more of a predictable of a social benefits so people knows what they can
00:59expect. Also targeted incentives for big tickets of spending such as autos you know green home
01:08upgrades. You remember they have a lot of the trading program implemented in China for government
01:14to subsidize with these big tickets buying with a huge discounts for households. At the same time
01:21obviously investment will continue to pivot towards advanced manufacturing, green technologies and
01:27digital infrastructures to create new domestic demand and jobs. So rather than relying on probably the
01:34traditional real estates and exports. Now we all know about the fragility of the property market.
01:41Policymakers have pledged to further stabilize the property sector. What needs to be done?
01:47Quite a few things they have been done already which you know cutting the mortgage rates which is an
01:55immediate economic impact to households and in a good way to reduce their mortgage payments. That's
02:02one. Remove a lot of restrictions they have done. Let the unfinished but sold home to be finished to
02:11provide social stability. Those are all on the right track. This will feel painful in the hard way because
02:19most of the Chinese households used to used to hold very high percentage of their financial assets give or take
02:26you know around 80% of their financial assets is in real estate. If you fast forward to today it's around 50 to 55%
02:35It will take time for the psychological level in China for household holders to adjust the level but I don't think there will be a crisis a moment in China purely because the overall leverage in the property sector in China I really in the low 30 on average 30% they are leveraged in that range. So it would take time to adjust but I do think a lot of the put policy being put in place.
03:03market should stabilize from here and a small uptake after Chinese New Year.
03:09Now no interview can pass without mentioning Mr. Trump's tariffs. What's your outlook for the impact of tariffs on China's economy.
03:17This is a very interesting topic because you can get different numbers every here and then but I think since US and China sit down and started the conversation five six months ago the progress has been on the positive side.
03:35We need to wait and see a few things. One is one one is what is the final rates for both of the country. I guess that does take longer time to come and agreed. Second is his whole actions taken by Trump is legal or not.
03:51I think the latest news is the US court believes otherwise. So we do need to wait for the headline to settle. That's one. But I see both countries are presenting a very professional way and constructively which is sit down, establish the framework, understanding the item should be discussed under the framework and agree an agreement.
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