Can China bounce back?
Ahead of the 17th China International Cement Industry Exhibition, which is due to take place in Nanjing, China, on 12-14 May 2016, this article presents an update on important recent developments in terms of domestic cement consumption trends and the pricing environment. Efforts to cut excessive capacity and promote industry consolidation also remain central themes. By Addison Dai, DBS Vickers, Hong Kong.
The start of 2016 has seen China’s macroeconomic policy support beat market expectations. In January this year, new lending climbed to a record CNY2.5trn (US$385bn), surpassing the previous high of CNY1.89trn in March 2009. This was partly driven by a boost in mortgage lending to CNY478bn versus CNY292bn in December 2015. In addition, China is increasing the supply of money in its economy, eyeing 13 per cent M2 growth in 2016. At this year’s National People’s Congress, held in early March, Chinese authorities said they would set the fiscal deficit at CNY2.18trn (or three per cent of GDP) to support GDP growth of 6.5-7 per cent. This compares to a fiscal deficit of CNY1.62trn in 2015.
These measures are expected to bring some relief to China’s cement sector which was hard-hit in 2015, both in terms of cement consumption and pricing.