Interest rate cuts and government stimulus finally pave the way for China’s recovery

Lower interest rates, Beijing’s economic stimulus package and the outcome of the U.S. presidential election won’t happen overnight, but will ultimately pave the way for a more vigorous economic recovery in the country, people in central China say. The vice chairman of a prominent real estate development company said in an interview. Interview.

George Wang, vice chairman of Zhonglu Group, said in New York last week that interest rates in the United States and China had “naturally fallen” due to the economic conditions in the world’s two largest economies.

He said the two countries did not need to “see eye to eye in the political arena” before benefiting from a low interest rate environment. Unlike last year, when the U.S. was raising interest rates to curb inflation and China’s rates were stable, “now you’ll see they’re doing the same thing.” High interest rates in the US and lower interest rates in China will encourage capital outflows from China, something Beijing does not want.

“Both countries are in the same boat of continuing to support and stimulate the economy,” Wang said. He said lower interest rates after next week’s U.S. presidential election “will be a major driver for both sides in future trade and cooperation.”

China’s benchmark CSI300 index has risen by a quarter since mid-September after authorities announced interest rate cuts and other measures expected to stimulate an economy that is growing at a slower pace than before the pandemic. . But the index has fallen nearly 7% from its peak earlier this month amid disappointment over the lack of new policy details. The CSI 300 is still 11% higher than a year ago. The Standing Committee of China’s legislative body, the National People’s Congress, will meet in Beijing from November 4 to 8, raising hopes for further economic stimulus measures.

Privately held Zhonglu Group, led by entrepreneur Wang Chaobin, has benefited from investments in Zhengzhou, the capital of Henan province, as well as projects in Beijing and the United States. A former public transport inspector, he moved into the private sector and began investing in real estate in the 1990s. He is currently listed on Forbes’ Real-Time Rich List with an estimated fortune of $1.7 billion. George Song, also known as Wang Zhonghai, holds a BA from Emory University in Atlanta and an MBA from Yale University.

International Monetary Fund Asia-Pacific Director Krishna Srinivasan expressed concern about China’s economic outlook and its impact on other Asian countries, saying last week that “weak demand in China is causing continued disinflationary pressures”. “There is,” he pointed out.

“Weak domestic demand in China also continues to weigh on broad regions,” he said. This month, international financial institutions lowered their forecast for China’s gross domestic product (GDP) growth to 4.8% from 5% in July.

However, Srinvasan said, “Authorities have announced additional fiscal and housing policies, which brings some upside potential to our growth forecast, especially in 2025 when policy measures are likely to come into effect.” There is a possibility.”

Wang also looks forward to subsequent policy measures that will lead to a clearer recovery. “From all the signals and announcements, I think the Chinese central government is working very hard this time around to deliver the stimulus that’s needed for the Chinese economy to do well, not just to survive, but to thrive. ” said Wang.

“And we will start to see a clear picture of a healthy, long-term economic cycle, especially after the results of the U.S. presidential election are known,” he said. Former President Trump has promised to impose new tariffs on Chinese goods, adding to the uncertainty heading into 2025.

Wang said more concrete stimulus measures from China would boost consumer confidence and lagging private sector spending. He said that both domestically and globally, “we’re seeing that because of the uncertain economic outlook, people are saving and not expanding and investing as much as they have in the past.”

Higher spending will create a virtuous cycle that will also benefit stock prices, Wang said. “Once it rises and sustains, a new cycle will emerge,” he predicted.

Meanwhile, Zhengzhou-based Zhonglu plans to convert a commercial building it owns in Beijing into a hotel and become part of the Atour Lifestyle Economy Hotel chain. “Beijing is the No. 1 hotel market in the country, and our hotel is located in a prime location in Haidian District, so it will continue to do well in the future.” It’s easy to run a business.”

Nasdaq-traded Atour shares, which are about 14% owned by China’s online travel industry leader Trip.com, rose 5% today to $27.37. It’s up 46% in the past year. Trip also rose 5% today to $65.07, and has soared 84% over the past year.

Regarding Zhengzhou, Wang said: “There are also ongoing projects in Zhengzhou. It has been a soft market for both commercial and residential real estate. However, prices in central Zhengzhou are still very low compared to developed cities in China. Cheap. We’re not in a bubble.”