Growth Dragons Weekly: China Beats GDP Estimates But Stocks Down
Here’s what happened in Growth Dragons this week:
Finally, China Beats GDP Growth Estimates
China Continues to Pour Billions into Belt Road Initiative and Spread its Influence Globally
J&T Global IPO to be Second Largest in Hong Kong This Year
Ping An Real Estate in the Wrong Spotlight
The Unmanned Flying Taxi is Coming Soon
#1 Finally, China Beats GDP Growth Estimates
The release of China's 3rd Quarter GDP provides a silver lining in the recently volatile markets. China's growth of 1.3% quarter on quarter and 4.9% year on year brings their 5% goal for 2023 within sight. These results beat estimates for year-on-year growth by 0.4%, signifying robust economic expansion.
The Consumer Price Index (CPI) reported a modest 0.4% growth, eliminating inflationary concerns affecting other countries globally. The decline in the Producer Price Index (PPI) has also narrowed. On the contrary, deflationary concerns are not imminent as evident from the prominent sales, domestic tourism from golden week and a rising employment rate of 0.2% last quarter.
It's worth noting that these gains were made despite a deteriorating real estate market, marked by a 9.1% reduction in property investment compared to the previous year, along with other challenges in China.
Despite the upbeat economic results, China stocks were met with another wave of selling, resulting in a 5% decline in the iShares Core MSCI China ETF (SEHK:2801) over the last five days. One could contend that this sell-off is not exclusive to China, as the S&P 500 and Nasdaq Composite also saw a 3% drop. This market turbulence is likely attributed to a flight to safety behavior, where investors are selling their stocks and opting for cash or investing in treasury bills. This shift is driven by the anticipation of prolonged high interest rates and the ongoing turmoil in the Middle East.
#2 China Continues to Pour Billions into Belt Road Initiative and Spread its Influence Globally
On October 17 and 18, 2023, China President Xi Jinping hosted the 3rd Belt and Road Forum for International Cooperation in Beijing. This particular session held special significance as it celebrated the 10th anniversary of the Belt and Road Initiative.
The guest of honor for this event was Russia's President, Vladimir Putin, who delivered a speech following President Xi and was photographed alongside him. Notably, due to Putin's presence, European delegates chose to abstain from attending the Forum in an effort to distance themselves from him and express a subtle form of protest against Russia's invasion of Ukraine. Consequently, only 22 world leaders participated in the event, a decline from the 29 and 36 leaders who attended the first and second forums, respectively.
Xi presented eight key ideas for the upcoming golden decade:
Establishment of a logistics corridor between Asia and Europe, integrating rail, ship, and air routes.
Creation of free-trade agreements and investment treaties.
Allocation of US$47.8 billion to drive projects by the China Development Bank and Export-Import Bank.
Emphasis on green development.
Increased focus on artificial intelligence.
Promotion of cultural exchange through Silk Road tourism.
Prioritization of transparency and integrity in the construction of the Belt and Road Initiative.
Formation of a secretariat to facilitate BRI operations.
As the forum concluded, media attention centered on the cooperation between Russia and China. This focus intensified due to their deepening ties since the declaration of their "no-limits" friendship. Russia reaffirmed progress on the Siberian 2 pipeline, which will supply China with oil and liquefied natural gas. A new trading route planned on the West Siberian railway and a shipping route through the Northern Sea enhance connectivity among European countries, Russia, and China. This development introduces a new dimension as the shipping route covers the shortest distance from East Asia to Europe, enhancing Europe's accessibility from China.
Additionally, three weeks ago, Biden hosted a two-day summit with Pacific leaders in Washington, pledging $200 million for climate change and infrastructural projects. This move was perceived as a response to China's growing regional influence, although the amount pledged pales in comparison to the $97.2 billion worth of agreements signed for various projects under the Belt and Road Initiative during this forum alone.