Key markets and metrics to track following China's stimulus: Maguire

Reuters

Key markets and metrics to track following China's stimulus: Maguire

2024 10월 3 일, 오전 6:00 GMT

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The opinions expressed here are those of the author, a columnist for Reuters.

By Gavin Maguire

LITTLETON, Colorado, Oct 3 (Reuters) -Beijing last month dispensed the most aggressive stimulus measures since the pandemic in a bid to revive the flagging Chinese economy, and traders and investors are now looking for signs if the medicine is working.

A slew of markets have already reacted positively to the measures, including equity indices and industrial commodities that traders and investors expect to benefit from any enduring recovery in the world's second-largest economy.

But any sustained rebound in Chinese industrial activity will also trigger a fresh climb in associated emissions, as the world's largest pool of steel mills, chemical plants, refineries and cement kilns potentially crank up simultaneously.

And as China is by far the world's largest polluter, anticipating exactly how any economic rebound translates into emissions rises will be key for climate watchers going forward.

Below are key data sets and markets that can help track the extent of any Chinese industrial revival and allow for emissions impact assessments.

TARGETED INTERVENTION

The core feature of Beijing's latest stimulus salvo was steep cuts to bank reserve ratios and existing mortgage rates designed to clear some of the gloom from the country's massive but ailing property sector.

An enduring credit crunch among property developers has effectively frozen construction activity across the country and resulted in a massive overhang of unfinished projects that have weighed on property prices and sentiment.

That in turn has stifled home buying interest and darkened the mood of Chinese consumers who previously viewed property ownership as a key means of wealth creation.

If Beijing's latest stimulus moves are effective, construction activity should pick up among unfinished projects and work on new developments may gather pace heading into 2025.

To track this activity, data on new housing starts .aCNNPRT, property prices CNHPIM=ECI and sales-to-inventory ratios published by China's National Bureau of Statistics are available on market data platforms such as those provided by LSEG.

Data on cement production - critical in all major property projects - can also be tracked alongside property metrics, which can allow for emissions impact assessments from the associated upturn in cement output and consumption.

WIDER RANGE TRACKING

Data on other industrial products can also reveal the extent of any revival, as output of electricity, passenger cars, steel, chemicals and refined fuels are all positively correlated with broader economic activity.

Imports of thermal coal - China's primary source of power and electricity generation - can also provide a clue as to the growth trajectory of key industrial hubs in China.

The country gets most of the coal used for power generation from its own mines, but imports roughly 6% of the coal it needs from Indonesia and Australia and delivers that to industrial hubs that are not well connected to domestic mines.

The southern port city of Guangzhou is an especially critical coal import hub, as it is geographically closer to key coal export ports in Indonesia than it is to China's own main coal mining hub of Inner Mongolia.

Guangzhou is also a major manufacturing hub along the Pearl River Delta, home to scores of factories and industrial plants that adjust power consumption and output to the ebbs and flows of the broader economy.

Tracking coal flows into the Guangzhou is possible using ship-tracking services on LSEG and from firms such as Kepler.

And historical data suggests coal import volumes into Guangzhou are highly correlated with coal import volumes into China as a whole, and so offer a reliable proxy on national-level coal import trends.

MARKET MOVERS

The price movement of certain commodities with heavy industrial applications can also act as a gauge on China's economic health.

The prices of iron ore, used in steel making, and hot rolled coil steel, used in construction and in car and appliance production, can be tracked on market data services and can act as a leading indicator on end-user demand for those products.

Changes to China's power sector carbon intensity can also reveal shifts in the composition of power fuel use and act as a signal of any upturn in overall power consumption.

Energy think tank Ember tracks how much carbon dioxide is emitted per unit of electricity that is generated, and historic trends in that data show increases in carbon intensity during periods of economic growth.

All told, a slew of regularly updated data points are on hand to help track the impact of China's stimulus efforts, which look set to take root across its economy over the coming months and potentially elevate greenhouse gas emissions.

Tracking China housing trends https://tmsnrt.rs/4ey5BrC

Key China industrial activity metrics https://tmsnrt.rs/3NaN9Ji

Tracking thermal coal imports into China https://tmsnrt.rs/3XKearY

China industrial bellwether markets https://tmsnrt.rs/4f6p4zx

Reporting by Gavin Maguire; Editing by Jamie Freed

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