Benjamin Cavender, Managing Director of China Market Research Group, speaks to CGTN Europe about the economy's drivers and investors' confidence.
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00:00The reality on the ground here is everybody's feeling like it's great that the central government finally came out and said,
00:08OK, we're going to put some stimulus measures in place to help the economy.
00:11But it's still very unclear to investors, to businesses just what that means in terms of scale.
00:18As you mentioned, those stimulus measures were welcomed by the markets.
00:22But it's not the first time we've had this bazooka, these measures to support the economy,
00:27that the property sector and to boost local government spending.
00:31Demand is still weak, though. So that means growth is still under pressure, doesn't it?
00:37Yeah, I think growth is very much under pressure.
00:40When you look at the stimulus that's happened so far this year, it's really kind of come out in drips.
00:45And it hasn't really done much to actually provide any kind of strong business confidence.
00:51And I think also, importantly, any kind of consumer confidence here.
00:54So you have a lot of households and a lot of companies, frankly speaking, sitting on cash right now that they're not putting into play,
01:01that they're not investing because they don't have a lot of confidence that there's actually a real plan in place
01:07that's going to drive the economy forward in a sustainable way.
01:11So I think that's a big issue right now.
01:14And I think just the fact that it's taken so long to get details out of the central government has probably given a lot of people pause.
01:22And it certainly has given investors pause. So I think that's what we're hoping for in the next few weeks.
01:27So you talk about that plan and that policy detail.
01:31What numbers, what kind of detail would you like to see that could really bolster the economy in the year ahead?
01:39Yes, I think the first part sort of has to do with scale.
01:43So when you look at what the market's been talking about,
01:47there have been suggestions that stimulus could look like anything from 1 trillion to maybe 3 trillion renminbi.
01:53So it's a pretty big spread.
01:55If the actual numbers end up coming out kind of towards the lower end of that range,
01:59I think sentiment's going to be, well, maybe the government isn't really being aggressive enough,
02:04isn't doing enough to help jumpstart the economy.
02:07So I think the hope is that we're going to see larger numbers.
02:10So that's the first part.
02:11The second part is, how is that money going to be used?
02:14I think what came out this weekend was basically, listen, we're going to help recapitalize the banks,
02:19make it easier for them to lend money,
02:21and we're going to help local governments get some of their bad off-book debt off their balance sheets
02:26by instead transitioning that debt to government loans.
02:30So superficially, that's all great.
02:32The problem is nobody knows how big those off-balance sheet loans are that local governments are carrying right now.
02:40So it's really hard to actually understand just how bad the problem is.
02:44And then on the bank lending side of things, right now, when I talk to company owners here,
02:50there's still a feeling that they don't really have strong domestic demand for their products.
02:54So they're not really interested in taking out loans until they see that consumer demand
03:00and company demand for their products and services starts to pick up.
03:04Now, structural headwinds remain, don't they?
03:07I'm thinking particularly of the real estate market.
03:10So do you think there needs to be a change in policy thinking for the stimulus,
03:15however big or small it is, to really have an impact?
03:18I think if I was looking for anything to happen right now,
03:21it would be a really strong structured plan to really push banks to lend not just to large companies,
03:30to state-owned enterprises, to really emphasize the fact that they have to be lending to private business.
03:35Because ultimately, that's what's going to jumpstart services sector
03:40and also jumpstart jobs for a lot of especially the younger Chinese consumers right now
03:45who are staying out of the economy because they don't have work.
03:48So that's probably where I'd be putting the emphasis.