The second largest economy can have a profound effect on the ebb and flow of commodities and as such, China’s efforts to prop up its economy can help lift commodities moving forward.
The headwinds have certainly been blowing in China’s direction in 2022. Aside from the global inflation the country is already facing, a surge in Covid-19 cases once again forced lockdown restrictions that put a stranglehold on its economic production.
To add to that, the country is still trying to climb out of a deep hole spurred by the real estate development crisis in 2021. Real estate comprises a sizeable amount of China’s economy so this issue alone is more than enough to deal with.
The government is already doing what it can in order to turn the real estate sector around, such as implementing fewer underwriting restrictions for prospective real estate purchasers when obtaining a loan. On the development side, loan extensions are helping developers to meet their obligations.
Whether or not these measures make tangible progress is anyone’s guess, but they are a step in the right direction. However, analysts note that more will need to be done in order to shore up the market from a fundamental perspective.
“This really is a temporary relief in terms of the developers having to meet less debt repayment needs in the near future — a temporary liquidity relief rather than a fundamental turnaround,” said Hong Kong-based analyst Samuel Hui, director, Asia-Pacific Corporates, according to a CNBC report.
“The key is that we still need the fundamental underlying home sales market to improve,” Hui added further.