China Update Morgan Stanley

Slowly getting back to normal, Worries outside of China the bigger concern

Daily power coal consumption of the six major power generation groups was down by 2.6% DoD, reaching 58% of pre-Lunar New Year (LNY) levels, well below ~90% at this point during normal years. On an actual YoY basis (i.e., same date), growth edged down to -37% on Feb 24 (vs. -36% on Feb 23 and -15% YTD).


“Return to work” traffic improving steadily: Passenger traffic rose to 15.4mn on Feb 24, with DoD growth accelerating to 4% from the average of 2.6% over the past week, suggesting improving return-to-work traffic. Among people who left tier-1 and tier -2 cities during the two weeks before LNY, 47% have returned (vs. 45% and 44% on Feb 23). In the first day of week 3, intra-city traffic congestion narrowed its YoY decline compared with workdays in similar periods last year, to -27% (vs. avg. of -30% post Feb 9).


More provinces adjusted down emergency response levels: The Politburo classified all regions into low-risk, medium-risk and high-risk categories, urging for full and orderly production resumption in low-risk and medium-risk regions. Over the past 24 hours, three more provinces – Jiangsu, Guangxi, and Guizhou – have lowered their level of Emergency Response Mechanism from level I (highest and most restrictive) to Level II & III, which means less restriction on production resumption and traffic normalization. Currently, provinces that have de-escalated account for 33% of national GDP.


City-specific property easing on the demand side: The China Zheshang Bank lowered the mortgage down payment ratio for first-time home buyers from 30% to 20% in cities that do not have house purchase restrictions, marking the first commercial bank to take up such measure. That said, we believe this only indicates some city-specific easing, as the PBoC’s 4Q Monetary Policy Implementation report reiterated “houses are for living not speculating”, and the PBoC deputy governor said on Feb 23 that mortgage interest rates would remain at current levels despite the recent LPR cut.

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