00:00Mark Oswald is the Chief Economist and Global Strategist at Global Investment Service Institute, ADM.
00:06Always fabulous to have you on Global Business Europe, Mark.
00:09Right, so Li Chang says that China needs to stabilise external demand and keep that growth on track.
00:16Looking at the numbers, where is that growth actually coming from?
00:21Well, as you highlighted, a lot of it's coming from the high-tech sector,
00:25from the auto sector, though not from domestic demand for autos, but external demand,
00:32and anything to do with clean energy.
00:36That's where all the strength is.
00:39The problem is, and there's a direct line here between the weakness in property investment
00:45and a lack of consumer spending on household goods.
00:49When you've had this sort of a lengthy downturn that's now lasted more than three years in property investment,
00:58you know, as much as one, there have been a lot of subsidy programmes of what one might call the
01:04cash for trash,
01:06getting people to upgrade their equipment,
01:09what you really need to keep high-ticket household spending going is for people to be buying new properties.
01:17Yeah. So it's interesting that you're mentioning property, you're mentioning consumer spending.
01:22Those headline numbers this month are soft, but underneath them,
01:25exports of semiconductors and all that tech stuff have nearly doubled this year.
01:29So is China's growth engine simply changing shape rather than stalling?
01:36It is changing shape, but the weakness in domestic demand has to be a concern.
01:44One would hope that in a booming external demand environment, i.e. strong exports,
01:51particularly to non-EU, non-North America countries, you know, that is growing very, very well,
02:00you know, also within Asia.
02:02But you need stronger domestic demand.
02:04And part of the problem is that the weakness in traditional sectors is weighing on wage growth,
02:11and that discouraged people from spending.
02:14One has to add that this particular month, one also has to take into consideration
02:18that quite a lot of the weakness was due to the three typhoons, which disrupted manufacturing.
02:25That would have been a lot stronger had it not been for that,
02:28and it also disrupted consumer spending.
02:30How much of China's industrial growth now is sustainable for a, I would say, at least probably 12 to 18
02:53months.
02:54We are going to get to a point with all the AI investment,
02:59and particularly given the tensions there between the much cheaper, in terms of usage,
03:08Chinese AI models and the U.S. models, which are that much more expensive to deploy,
03:14which will create some disinflation, and therefore the numbers will come down.
03:18At the moment, one also has to add that a lot of the export numbers out of Asia are very
03:25impressive,
03:26but the value numbers, and part of that is due to the fact that semiconductive prices
03:32are up by a factor of almost five since a year ago.
03:36Well, I'm looking forward to talking about more Chinese data with you,
03:40because we have that consumer conversation all the time,
03:43but it will be interesting to see what happens with prices.
03:45Mark Oswald, thank you.
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