Economy

ASX 200 takes a hit as China's economy deteriorates faster-than-expected

Mon 16 May 22, 2:24pm (AEST)
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Key Points

  • China missed estimates for retail sales, industrial output and asset investment
  • Property data is showing no signs of stabilising after last year's Evergrande meltdown
  • The ASX 200 pulls back sharply, headlined by China-dependent mining stocks

China’s economy deteriorated faster-than-expected in April amid covid outbreaks and the stringent lockdowns.

China’s National Bureau of Statistics released a series of economic indicators at 12:00 pm AEST, including (all figures are year-on-year): 

  • Industrial output fell -2.9%

    • Missed estimates of a 0.5% gain

    • Lowest reading since February 2020

  • Retail sales tumbled -11.1%

    • Wider-than-expected decline compared to estimates of -6.6%

    • Lowest reading since March 2020

  • Fixed-asset investment rose 6.8%

    • Missed estimates of a 7% increase

    • Measures expenditure on infrastructure, property, equipment and machinery

  • Urban unemployment rate of 6.1%

    • Does not include figures for migrant workers

    • Covid peak was 6.2%

To add further insult to injury, China flagged that its real estate sector remains in a state of decline:

  • Home sales value -32.3%

  • Home sales area -25.4% 

  • Property sales value -20.5%

  • Property sales area -20.9%

  • New property construction -26.3% 

On the commodity front:

  • Domestic coal production of 362.8m tonnes, up 10.7%

  • Coal imports of 23.55m tonnes, up 8.4%

  • Crude steel production of 92.8m tonnes, down -5.2%

ASX 200 slumps

The S&P/ASX 200 was already pulling back from intraday highs in the lead up to China's economic news.

When the numbers came out, the ASX 200 briefly fell to breakeven for the day, from an intraday high of 1.05%.

2022-05-16 14 00 29-XJO 2022-05-16 14-00-11.png ‎- Photos
ASX 200 1-minute chart (Source: TradingView)

The selloff was headlined by miners that are dependent on China's economic growth.

Large cap names like Fortescue (ASX: FMG), Rio Tinto (ASX: RIO) and BHP (ASX: BHP) which opened 1-2% higher are now down 1-2%.

Is weak data a good thing?

A rapidly deteriorating China could deter the US Federal Reserve from a more hawkish path for interest rates.

China has also laid out plans to relax the harsh lockdowns in Shanghai.

According to Vice Mayor Zong Ming:

  • Shanghai to fully resume normal orders of production and life by mid-to-late June

  • Shanghai will gradually resume rail and bus services from May 22

  • No community covid spread in 15 of 16 districts

 

Written By

Kerry Sun

Finance Writer & Social Media

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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