By Gavin Maguire
LITTLETON, Colorado- 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.
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 property prices 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.
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 percent 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. – Reuters