Weekly Buzz: 🐉 China’s economy grew 5.2% – was it enough?

26 January 2024

The Chinese economy grew 5.2% last year – exceeding the government’s official target and its 3% increase in 2022. But some economists still aren’t particularly excited.

What’s got economists down?

China’s economy was 5.2% bigger than in 2022, sure, but that’s a fairly small increase from a year plagued by strict COVID lockdowns.

Remember too, that its struggling real estate industry has been defying the government’s best supportive efforts. Investment in property development dropped by 9.6% last year compared to the one before, while new home prices slid 0.4% year-over-year in December – the fastest pace in nine months.

And with the Chinese people cutting back as their biggest assets lose value, the country’s witnessing its longest streak of deflation since 1999.

In other words, China’s economy has been the poster child for the zodiacal ox over the last year, proving stubborn even in the face of the central bank’s escalating stimulus (our Simply Finance section below breaks this down).

To transform the economy into the lucky dragon instead, economists expected the People’s Bank of China (PBOC) to trim a key interest rate last week. But instead, it was held steady at 2.5%. Now, this could be because there are already signs of positive momentum – exports did grow in December. Plus, the central bank just lowered the amount that the country’s banks are required to hold on reserves, which should spur consumer spending overall.

As an investor, what does this mean for me?

Chinese stocks are now cheap, having slumped by almost 60% since early 2021. That dip has left the price-to-earnings ratio based on expected profits for Chinese companies below 10 – about half the global average. And cheaper valuations can mean opportunities for investment.

Let’s look at the bigger picture. The risk of a systemic meltdown in China is low (we dive into the details in our latest Outlook piece) and the nation is transitioning to new areas of growth. While the road to recovery may be long, the patient investor could be rewarded.

📰 In Other News: Uranium is powering up

Uranium has seen a powerful rally in the past three years, with its price more than tripling to a 16-year high. And that strength isn’t likely to fade anytime soon, especially now that the world’s biggest producer of the metal is warning about upcoming supply shortfalls.

The metal’s blistering rally over the past few years mainly comes down to these simple facts: demand’s growing and supply’s low.

Governments are looking to build new nuclear plants to reduce their reliance on fossil fuels and secure energy independence, particularly after Russia’s invasion of Ukraine. Plus, nuclear power is a clean energy source, which can help countries reach emissions targets.

The problem is that uranium supplies are tight: mining tapered off over a decade ago, after the Fukushima nuclear accident. And there’s no quick fix here: uranium projects take a long time to start, so the market will probably be tight for some time.

Uranium was one of the top-performing commodities last year, and with all those factors, it may well continue that hot streak. If you’re interested, we recently expanded our Flexible portfolios, allowing direct investment in the uranium industry.

These articles were written in collaboration with Finimize.

🎓 Simply Finance: Economic stimulus

Economic stimulus is like a financial jumpstart for the economic engine, especially if it’s showing signs of stalling. Governments and their central banks can step in and inject money into the economy by spending on projects, cutting taxes, reducing interest rates, or combining these actions into a stimulus package. This can spur economic activity, leading to more jobs, more cash, and more consumer spending.

📺 In The Press

Should you save or invest right now? Our Co-founder and CEO, Michele Ferrario, was live on CNBC to share insights into recent investing trends – and why making your money work for you means combining savvy cash management with a well-diversified investment portfolio. 

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