China’s economy is improving, but it’s not yet clear
As China takes steps to gradually reopen businesses and authorities introduce a range of measures to stimulate activity, there are signs that a recovery may be imminent.
Still, analysts say much more needs to be done to restore investor confidence in China, and some significant risks have not gone away.
“It will take time to restore business confidence, and Chinese asset sales could resume if Chinese data proves disappointing again,” said Ken Cheung, chief Asian currency strategist for Mizuho Bank.
Ant Group said on Thursday that it “currently has no plans to launch an IPO.” The China Securities Regulatory Commission added that it had not conducted any research work regarding a new Ant IPO.
In Hong Kong, meanwhile, the stock has risen for five consecutive sessions and is up 22% this week – the best weekly performance since Alibaba’s secondary listing in 2019.
The Chinese government has provided further relief to the tech sector in recent weeks. Regulators said they would support overseas listings of tech companies.
The Hang Seng Tech Index, which tracks the 30 largest Chinese tech stocks in Hong Kong, is up 10% this week.
Trade is improving
China also released strong trade data for May, following a slump in April. The country’s exports jumped 16.9% in May from a year ago, compared to growth of just 3.9% in April.
Imports, meanwhile, rose for the first time in three months.
“The increase in exports and imports is mainly due to the reopening of Shanghai Port, China’s largest port, in the last week of May,” said Iris Pang, chief economist for Greater China at China. ING Group.
Congestion at the Port of Shanghai is almost “back to normal”, VesselsValue, a shipping data firm, said earlier this week. Average wait times have now shortened to 28 hours from 66 hours at the end of April.
On Wednesday, Premier Li Keqiang urged local government officials to ease transportation and logistics and protect supply chains. China will strive to achieve reasonable economic growth in the second quarter and reduce unemployment, he said, reiterating previous calls.
Is it enough?
But analysts remain cautious.
The May trade data does not change the “consensus view that China’s trade surplus will shrink” as demand for Chinese exports weakens due to a slowing global economy, said HSBC analysts on Thursday.
“As commodity prices remain high, these imports will be costly for China,” they said.
China adherence to a strict Covid restrictions policy also remains a significant risk.
A growing number of neighborhoods in Shanghai face another temporary lockdown this weekend as authorities launch mass testing days after Covid restrictions were eased for most of its 25million population.
Authorities in Beijing’s largest Chaoyang District also announced the closure of all entertainment venues on Thursday, just days after allowing them to reopen.
“Markets naively assumed that China was one with Beijing and Shanghai,” said Jeffrey Halley, senior market analyst for Oanda, on Thursday.
“Covid-zero isn’t going anywhere in China, and neither is the virus. So the odds of a return of prolonged restrictions, with the ensuing decline in China’s economic activity, remain as high as ever,” he added.
— CNN’s Beijing bureau contributed to this report.