Commentary
Chinese investors have been battered this year so far. They will watch closely the upcoming twice-a-decade Chinese Communist Party (CCP) national congress in October for signs of a shift in economic policy.
There are numerous headwinds facing China’s economy—rolling COVID-related lockdowns, a real estate market downturn, ongoing trade issues with the United States, Beijing’s support of Russia’s war in Ukraine, and a hawkish U.S. Fed. Chinese stock investors have already sustained some big losses in 2022, with the Shenzhen Composite Index down by more than 21 percent and the Shanghai Composite down 15 percent since the beginning of the year.
All eyes are now on the national congress event in mid-October; investors are keen to see what economic changes are in store after political winds settle.
What are some of the possible policy changes?
One potential shift is to double down on saving the real estate market. Home prices in China have fallen every month in the last 12 months. China Evergrande—the country’s No. 2 developer and somewhat of a poster child for the industry’s woes—has been tottering since 2020, when efforts to deleverage the sector were introduced. Soured loans have skyrocketed, with Citigroup calculating in September that almost 30 percent—29.1 percent—of all property loans have become “bad debt.”
More broader and deeper stimulus measures for the property market could be in store in October. Bloomberg, in a recent report,…
