SINGAPORE (Mar 20): Domestic demand is a much larger portion of the Chinese economy than during the GFC, and the Chinese consumer has become an important aspect of domestic demand. “In 2019 China’s retail sales amounted to US$5 trillion ($7.1 trillion) compared to US$5.5 trillion in the US. In 2012, Chinese retail sales were valued at US$3.7 trillion while the US’ was US$4.3 trillion. So the gap has closed quite fast,” says Suan Teck Kin, head of research at UOB Global Economic and Market Research.

Since the external economy with Europe and the US is hampered by Covid-19, China’s domestic economy will have to pick up the pace, says Suan. “Local governments are providing spending incentives. For instance in southern China for car purchases, people are encouraged to replace old cars,” Suan points out. As China gets back to work, consumer demand is likely to rebound, he adds. 

That news will be a welcome relief to locally listed REITs with Chinese retail assets. These REITs are likely to report a decline in net property income in the first quarter, although the decline distributions per unit could be mitigated by some form of support.

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