China’s economic outlook just turned dimmer amid downbeat October data, with surging domestic COVID-19 infections and slumping real estate market threatening to aggravate weak petrochemical demand.
New-home prices in China’s 70 cities in October fell by 0.37% month on month, marking a 14th straight decline and the worse decline in seven years, National Bureau of Statistics (NBS) data showed on Wednesday.
On a year-on-year basis, new home prices for the month fell for the sixth straight month, declining by a steeper 1.6% compared with a 1.5% drop in September.
“China’s 16-point plan [unveiled 11 November] to boost the real estate market is yet the clearest indication that the government is ending its clampdown on the real estate market as it eased the cap on lenders’ exposure to the property sector,” said Ho Woei Chen, economist at Singapore-based UOB Global Economics & Markets Research.
China has also eased quarantine and flight bans, marking a more targeted approach to its zero-COVID policy and further relaxation of its curbs despite a spike in new cases in multiple major cities.
Domestic prices of polyethylene (PE) and polypropylene (PP) rose following the introduction of the measures on 11 November.
On a CFR (cost and freight) China basis, linear-low density PE (LLDPE) prices have risen by $/tonne since the announcement, while PP prices increased by $30/tonne, according to ICIS senior Asia consultant John Richardson.
China, however, has yet to provide a clear timeline for an actual re-opening, while the rest of the world have mostly adopted a living-with-COVID approach.
“While the measures indicate the government is giving more attention to economic growth, any near-term lift to China’s recovery will still be limited due to current record surge in COVID infections in cities such as Guangzhou, Zhengzhou and Beijing as well as its adherence to a zero-COVID policy and remaining stringent COVID measures,” UOB’s Ho said.
Expectations of improved demand following recent measures continued to buoy up sentiment in China’s domestic petrochemical futures markets on Wednesday morning, with methanol futures rising by 1.1%.
