00:00Mark Oswald is the Chief Economist and Global Strategist at ATM Investor Services International.
00:06Great to see you again, Mark.
00:07So, is this a set of numbers that should reassure investors?
00:14It's a mixed bag.
00:16The primary drag, actually, on GDP was the rise in energy prices.
00:21For the first time since the first quarter of 2023, deflation is no longer an issue.
00:30The deflator came in at 1.6%, but in real terms, obviously, that's a drag on GDP.
00:37The monthly indicators, yeah, it's good to see retail spending back in positive territory,
00:45but it's still actually quite far below that stated target of about 3.7% per year, as outlined in
00:53the five-year plan.
00:54Industry is still a massive strength, as is external demand, particularly autos and anything AI-related.
01:03So, there are still imbalances in the economy, and above all, the property sector continues to wave very, very heavily.
01:11Secondly, property investment down 18.7%.
01:14That's the worst contraction in this four-year cycle we've had of a drag on GDP from the property sector.
01:25As much as you don't want to see people going crazily into the property sector, given the demographics that there
01:34are in China,
01:35you also don't want the big debts that there are in the sector to be weighing on the economy.
01:41Because that basically flags up bank balance sheets when they could be lending to many other sectors if they weren't
01:49encumbered by those property debts.
01:51So, a lot of this is reflected in the global backdrop as well as challenges at home.
01:55But, you know, China's growth model here clearly evolving.
01:59Are we seeing a sustainable, higher quality expansion taking shape, or is the economy still too reliant on exports, on
02:07industrial strength?
02:11It is too reliant on external demand.
02:14But, on the other hand, when I look at the external demand, it's not really surprising that I've expected to
02:20see that continue in the second half of the year.
02:23Because China makes a lot of things that people need for the tech sector, for the energy transition, above all
02:31autos.
02:32Auto sales, auto exports are skyrocketing because so many of the other automakers aren't competitive.
02:41But what definitely needs to be done is something to stimulate personal consumption.
02:47And it needs to be done probably in a much more forceful way.
02:51Social transfers, as outlined, an increase in social transfers, as outlined in the five-year plan, would certainly help.
03:01But what really needs to be there, which was evident in the loan data today, is more confidence from consumers
03:09and businesses to borrow.
03:12And at the moment, that's simply not there.
03:14Just very quickly, Mark, I think I know what you're going to say here, confidence, consumer confidence.
03:20But what will change the market conversation on China from here?
03:23What signals are investors watching in the months ahead?
03:28I think they will be looking at what exactly the details of what sort of stimulus to get the grey
03:35economy going,
03:36get improved childcare are going to be, and whether they see those as getting long-term traction.
03:43Mark Hossfold, great to speak to you again.
03:45Thank you so much.
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