China is speeding up efforts to resurrect the economy’s recovery and enhance the business environment as concerns about the economy’s growth forecast intensify. China’s efforts to kick-start a property sector revival are poised to have a substantial, positive impact on international stock markets and delight global investors, says the founder of one of the world’s largest independent financial advisory, asset management and fintech organisations.
The upbeat assessment from deVere Group’s Nigel Green comes as The People’s Bank of China eased borrowing rules and slashed the reserve requirement ratio for foreign exchange deposits from the current 6% to 4%. Some of the country’s largest banks also cut interest rates on yuan deposits.
Green says: “Global stock markets are set to get a boost amid the rollout of steps being taken by the People’s Bank of China (PBOC) to revive the country’s beleaguered property sector. We expect the decision to ease borrowing rules and cut reserve requirements for foreign exchange deposits, plus the cutting of interest rates on deposits will have a considerable positive impact on global stock markets as investors digest news that Beijing is being proactive on this critical economic issue.”
China’s property market had been facing a crisis marked by plummeting property prices, oversupply, and a debt-laden real estate sector.
This turmoil raised concerns not only for China’s domestic economy but also for global investors with exposure to Chinese assets.
“The global impact of China’s efforts to revive its property sector cannot be underestimated,” says Nigel Green.
“A healthy property market is a vital driver of economic growth. As China’s property sector stabilises, it will boost construction activities, create jobs, and stimulate related industries like cement, steel, and furniture. The resultant economic growth will have a positive spillover effect on global markets, especially for countries that rely on China as a major trading partner.”
Green continues: “China’s property crisis had dented investor confidence in the country’s markets. Therefore, by addressing the issue, China is sending a reassuring message to international investors that it is committed to maintaining stability and promoting growth.
Restored confidence will, we expect, lead to increased foreign investments in Chinese assets, benefiting both domestic and global portfolios. China’s property sector revival will offer new investment opportunities, both in the real estate market and related industries. Global investors looking for diversification and growth prospects can be expected to find China an appealing destination once again.”
Since the beginning of this year, Nigel Green has been publicly saying that Beijing will take the necessary measures to shore-up the world’s second-largest economy and that global investors “must not overlook the opportunities in China if they are serious about building long-term wealth.”
The deVere founder concludes: “Global financial markets will be buoyed by these measures that will stabilise the critically important Chinese property market, restore investor confidence, and stimulate economic growth.”
Getting caught up on a week that got away? Here’s your weekly digest of the Globe’s most essential business and investing stories, with insights and analysis from the pros, stock tips, portfolio strategies and more.
Silicon Valley Bank has collapsed – now here’s the good news
The collapse of Silicon Valley Bank, one of the world’s most prominent technology financiers, marked the second-biggest bank failure in U.S. history after Washington Mutual in 2008. The shutdown by California’s Department of Financial Protection and Innovation sent shockwaves across global markets and left governments and tech CEOs scrambling to limit the impact of SVB’s sudden failure. According to David Rosenberg, major banks are continuing to tighten their lending guidelines and boost their loan-loss provisions, and Americans should be prepared for a period of deflation. Meanwhile, bond markets have made a dramatic reassessment of future rate moves by central banks, including that of the Bank of Canada, writes Darcy Keith. For Canadians looking to buy a home, renew their mortgage or borrow money, Rob Carrick says that the demise of SVB is the break you’ve been waiting for.
Flair Airlines has four planes seized for non-payment
If you have a Flair Airlines flight booked for summer travel, you may want to double-check your boarding pass. The Edmonton-based discount carrier had four airplanes seized last week for non-payment of US$1-million to Dublin-based Airborne Capital Ltd., Eric Atkins reports. Working with bailiffs, the leasing company grounded four Boeing 737s: two at Toronto Pearson Airport, one in Edmonton and one in Waterloo, Ont. Flair leases six planes from Airborne – two 737s have not been seized – and another five from Bank of China Aviation. Flair recently paid its arrears to the Bank of China, but failed to come to an agreement with Airborne.
Canada’s real estate correction, in inflation-adjusted terms
February’s housing report from the Canadian Real Estate Association indicated this is the steepest house price correction at the national level in decades. The typical home in Canada has fallen by $132,000, or 15.7 per cent since last February – even worse when you factor in inflation. In inflation-adjusted terms, national house prices have fallen nearly $168,000, a nearly 20 per cent decline. Meanwhile, bigger mortgages and higher interest rates mean ownership costs eat up 60 per cent of average household incomes now, compared with 44 per cent then, according to RBC Economics. Jason Kirby takes a closer look in this week’s Decoder.
Tips for filing your income tax return
Tax season is upon us, and Canadians are urged to file earlier due to an impending strike involving 35,000 Canada Revenue Agency workers. With that in mind, Tim Cestnick offers six tips to help you file your tax return properly. You may be entitled to some new credit or benefits, such as the first-time homebuyer’s tax credit (the base amount was increased to $10,000) or the home accessibility tax credit (eligible expenditures increased to $20,000). You may also want to look into whether you qualify for the new Canada Dental Benefit. Ontarians who booked a staycation in the last year can claim 20 per cent of eligible accommodation expenses, such as hotel or campground stays, up to $200 per person on their taxes.
Volkswagen to set up EV battery factory in St. Thomas
German auto giant Volkswagen announced this week that St. Thomas, Ont., has been chosen as the site for its first battery factory outside Europe, after considering locations in both Canada and the United States. As Adam Radwanski reports, this helps solidify Canada’s effort to position itself as a major player in electric-vehicle manufacturing. While details of the planned investment, including the dollar amount, haven’t been disclosed, a 1,500-acre swath of land near London has been designated for industrial development. Other possible destinations such as Windsor have already reached their capacity to support such projects because of recent EV-related commitments by Stellantis NV and LG Energy Solution. The workforce in St. Thomas, which has struggled to replace hundreds of jobs lost when Ford closed its assembly plant over a decade ago, is not stretched as thin.
Why the U.S. wants to ban TikTok – and what it means for Canadians
The Biden administration has threatened to ban TikTok in the United States if the social media app’s Chinese owners, ByteDance, refuse to sell their stakes. White House officials have grown increasingly concerned about the safety of Americans’ data. But a nationwide ban would face significant legal and societal hurdles, since TikTok is popular with over 100 million Americans and an app has never been banned in the country. We look at the bill currently being considered by Congress, the response from TikTok, how this ban potentially affects American content creators – and whether this could happen in Canada too.
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Now that you’re all caught up, prepare for the week ahead with The Globe’s investing calendar.