Amy Xie Patrick, Pendal’s head of income strategies:
The first thing to remember about these China authorities is they are not independent monetary authorities as we know them in Australia and the US.
The central bank in China has been lowering interest rates because the economy quite frankly is in a rut.
Most major investment bank analysts expect growth in China will fall to levels not seen over the last decade.
Quite frankly China will struggle to get above the 4% threshold for the next year or perhaps even more.
So the reason why China central bank is easing when the rest of the world is tightening, is because its economic situation looks a lot more dire.
China’s economic cycles over the last decade have largely been self-engineered.
It usually booms to a point where authorities get concerned about whatever is causing that boom.
And typically that’s always been property. China’s property market is quite unique — it is the one place in the world where its top-tier cities have vacancy ratios of around about 25%.
So just think about that.
About a quarter of the properties in big cities like Shanghai and Beijing sit vacant. They’re not even being rented out. There is a huge oversupply of properties.
Property is a store of wealth for the Chinese population as a whole.
But the amount of debt that gets accumulated behind the sector (mainly on the developer side) has gotten authorities worried that debt levels will become unsustainable if they continue to stimulate the economy out of trouble.
Amy is Pendal’s Head of Income Strategies. She has extensive experience and expertise in emerging markets, global high yield and investment grade credit and holds an honours degree in economics from Cambridge University.
Pendal’s Income and Fixed Interest boutique is one of the most experienced and well-regarded fixed income teams in Australia. In 2021 the team won Lonsec’s Active Fixed Income Fund of the Year Award. In 2020 they won the Australian Fixed Interest category in the Zenith awards.
The team oversees A$22 billion invested across income, composite, pure alpha, global and Australian government strategies.
Pendal is an independent, global investment management business focused on delivering superior investment returns for our clients through active management.
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