Chinese economic data suggests that the risk of a "hard landing" in the world's second-largest economy is rising, JPMorgan Chase & Co.'s Adrian Mowat said.
Fixed-asset investment in real estate has increased 35 percent in the first four months of the year even amid "very weak" property sales demand, Mowat, the brokerage's chief Asia and emerging-markets strategist, said in a Bloomberg Television interview in Hong Kong. This means that residential inventories will increase and lead to a contraction in construction activity this year, he said in the interview.
"I'm quite worried about the Chinese data, which suggests to me the probability of hard landing is building in China," Mowat said. Global markets, including commodities, will continue to be "correcting," he said.
The Shanghai Composite Index has sunk 7.3 percent from a five-month high on April 18 amid concern the central bank will add to four increases in interest rates since early last year to cool inflation. The government has also boosted banks' reserve requirements five times this year to mop up liquidity. Foreign direct investment in China increased 15 percent to $8.5 billion in April, the Ministry of Commerce said today.
China still faces inflationary pressure and consumer prices haven't peaked, Shanghai Securities News reported May 16, citing Yu Bin, director general of the macroeconomic research department of the State Council's development research center. The economy faces a slowdown, the newspaper cited Yu as saying.
Export Slowdown
The country's export growth is likely to decelerate towards "the high-end'' of single digits around mid-year, orders received during the China Trade Fair suggest, Credit Suisse Group AG said in a report today.
The China Trade Fair reported a 5.8 percent increase in export orders from the previous one held in September, the weakest growth since the second half of 2009, Dong Tao, an analyst at Credit Suisse, wrote.
"What is more worrying is that the exporters are only committed to short-term orders, typically below three months," Tao wrote. "Surging labor costs and labor shortage were the biggest concerns, along with a sharp rise in material costs."