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To get out of a bear market, China needs to be proactive

23 0 4

What a difference a year makes. Around this time last year, one of the most frequently asked questions about China’s economy was: is it in a new boom cycle? The optimism about the Chinese economy was largely driven by the consumption story. By this logic, rising consumption would not only help China sail through structural challenges, but also rebalance the global economy and boost the financial markets.

However, the market has to admit that it might have been too naive and underestimated the challenges facing China. What has really surprised the market is China’s extremely poor consumption figures this year, which have raised concerns about the soundness of China’s domestic demand. For instance, passenger car sales barely grew in the first three quarters of this year, the weakest performance in about a decade. Amid the gloom about China’s demand and the uncertainties from trade tensions, global automobile producers need to think twice before they allocate more investment for China.

In the meantime, China’s deleveraging campaign appears to have stalled, fuelling worries about medium-term growth prospects. According to recent data from the Bank for International Settlements, China’s non-financial corporate debt as a percentage of gross domestic product has ticked up........

© South China Morning Post