Ahead of the release of Chinese economic data on Monday, the market is now beginning to be restless with gloomy expectations influenced by several key factors.
The outlook for the world’s second -largest economy has been bleak in recent months following a downturn in the property market and electricity shortages that have forced factories to limit production or shut down altogether.
Beijing continued to tighten restrictions on the property market in an effort to curb financial risks, causing a downturn in construction and exacerbating the crisis Evergrande is experiencing.
The combined sales of China’s top 100 developers declined 36% year -over -year in September, which has traditionally been the peak season of home sales.
This will have a huge impact on the economy at large, as according to Goldman Sachs, the real estate and related sectors are estimated to be nearly a quarter of China’s Gross Domestic Product (GDP).
The problem of electricity shortages has also prompted factories to slash production in the second half of September, causing the PMI index to fall below 50 for the first time since the pandemic began last year that marked a contraction in the manufacturing sector.
In addition, weak consumption also weighed on the country’s growth, as China implemented a ‘zero Covid-19’ policy to curb the epidemic during its resurgence in mid-July.
However, on the other hand, China’s economy is sustained by booming exports. Unexpected export growth in September is good news for Beijing which also supports the strengthening of the yuan this year despite the worsening growth prospects.
If China’s economic growth falls short of market expectations of a decline, it is likely to have an impact on currency sentiment early next week.
