Xi faces calls for relief from property slump at upcoming Communist Party conclave

The stock market trading activity in China has been as muted as it was in late September 2022, according to data from Bloomberg.

The Chinese Communist Party's 376-member Central Committee will convene next week between July 15-18 to debate and set the direction on major policy matters at its third Plenum.

Steps to address the property slump and fiscal relief for local governments is being pitched as key issues on agenda at the four-day conclave.

At the end of the gathering, announcements to kick-start growth are expected, with likely steps to counter the slump in real estate - a major overhang on China's economy - being a major one.

As the Plenum approaches, there are serious issues that China watchers have to reconcile with:

Reviving China's Real Estate Crisis

China's real estate sector has been in a multi-year crisis which has deepened in recent months, with property prices in May falling at the sharpest rate in a decade, as per data from National Bureau of Statistics (NBS). The crisis has impacted some provisional governments' revenue collections which rely heavily on land sales. The PBoC had in May unveiled a $41 billion plan to help state-owned companies buy unsold housing supply, a measure that potentially runs a risk of yuan depreciation and moral hazard for home buyers.

Consumption Slump

China's June 18 shopping extravaganza - also called the 618 shopping carnival - plummeted for the first time ever, and consumer confidence is still near the lows that it hit during the pandemic.

Trade Tensions

China has laid out an ambitious 5 percent growth forecast for the year but is partly relying on exports to achieves it. A potential escalation of a tariff faceoff with US in case Donald Trump ascends to Presidency cannot be ruled out later this year. The EU and China too have been locked in a tariff war over electric vehicles, and its EV export to EU has reported slower growth in June, as per China Passenger Car Association (CPCA).

Growth Pangs

It is widely expected that China will report that its economy grew by 5% in the quarter end June, said a economist survey by Bloomberg, which would be the lowest growth rate in three quarters.

Also Read: China experiencing dramatic slowdown in its economy

Street Cautious

The stock market trading activity in China has been as muted as it was in late September 2022, according to data from Bloomberg, when the 20th Party Congress was scheduled to convene. Foreign investors too have largely been sellers in China, running a risk of second month of outflows. If that happens, China flows may slip into negative on year-to-date basis.