China_ So far, not so good

Summary of Key Points from the Conference Call Industry Overview - The property sector in China is identified as a weak link in the economy, with property sales showing a slight recovery of 3.2% year-on-year in November, compared to a decline of 1.6% in October, marking the first increase since May 2023 [1][18] - Despite the recovery in sales, major property indicators still reflect weakness, with property investment contracting by 11.6% year-on-year in November, slightly better than the 12.3% decline in October [1][41] - The number of cities reporting declines in secondary home prices improved slightly, with 58 out of 70 major cities experiencing declines, down from 59 in October, indicating the smallest number of declines since May 2023 [1][18] Core Insights and Arguments - The contraction in property investment remains significant, with new starts down 26.8% year-on-year and floor space under construction falling by 40.2% in November [1][41] - The completed floor space also saw a significant drop of 38.8% compared to a 20.1% decline in October, indicating ongoing challenges in the property market [1][41] - The government is expected to unveil a fiscal package in March 2025, which may include raising the budget deficit to 3.5-4.0% of GDP and increasing the local government special bond quota to CNY4.0-4.5 trillion [6][12] Additional Important Information - Retail sales growth in November was disappointing, slowing to 3% year-on-year, missing expectations, primarily due to a decline in discretionary goods sales [41][24] - The outlook for retail sales growth is cautious, with expectations of moderation to 3% year-on-year in 2025, reflecting potential payback from durable goods demand and a deteriorating labor market [43][41] - The central bank is anticipated to cut policy rates further, potentially by 10 basis points per quarter, depending on inflation trends, with a possibility of more aggressive cuts if inflation remains low [22][12] Conclusion - The property sector continues to face significant challenges despite some signs of recovery in sales, with ongoing contractions in investment and construction. The government is expected to implement fiscal measures to stimulate the economy, but the overall outlook remains cautious due to structural headwinds and weak domestic demand.