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Pekingology

Reshaping Corporate China

Aug 25, 2023
In this episode, Thomas Gatley discusses his report on reshaping corporate China. They analyze winners and losers during the profit shock, the challenges faced by private and state-owned enterprises in the real estate sector, and the regulatory tightening that hinders investors from investing in new Chinese stocks. They also explore the changes in China's industrial policy since 2020.
54:27

Podcast summary created with Snipd AI

Quick takeaways

  • The decline in the real estate sector poses a challenge for sustaining high rates of infrastructure investment and generating sufficient aggregate demand.
  • Chinese firms, especially in the private sector, face challenges in raising capital both onshore and offshore, affecting growth prospects and investor confidence.

Deep dives

Real Estate Sector Decline and Its Impact on Capital Allocation

The real estate sector in China is experiencing a significant decline, with property sales and starts dropping to less than half of 2019 levels. This decline has major implications for capital allocation as real estate investment has been a dominant force in the Chinese economy. While the government has been pushing for investment in capital goods and tech hardware industries, the scale of the decline in real estate investment is so significant that it cannot be easily replaced by investment in other sectors. This creates a challenge for sustaining high rates of infrastructure investment and generating sufficient aggregate demand.

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