FTCR China business index hits six-month high on real estate boom

March 30, 2017

by: FT Confidential Research

The FTCR China Business Activity Index (BAI), a composite reading of the month-on-month change in activity in the country’s real estate, export and freight sectors, hit a six-month high in March.

The index rose back above the 50-point mark that separates expansion from contraction for the first time since October 2016. The BAI was 2.6 points below last March’s reading but was above the average of 50.9 for the previous 12 months.

Two of the BAI’s three components improved in March, although our freight index remained below 50 for a third straight month. The FTCR China Freight Index rose 2.8 points month-on-month to 45.9 while our Export Index fell 0.8 points but still pointed to a ninth straight month of improvement in the external sector.

The big driver of the headline index reading in March was our Real Estate Index, which jumped to its highest level in six months on the back of surging sales and prices across all city tiers.

FTCR’s March data highlight the importance that the housing market is playing in supporting growth. China’s leadership has stated it intends to rein in the market. Local governments are taking their lead in ratcheting up administrative controls, while the monetary authority is tightening credit supply for both developers and home buyers.

Our data show the limited effect this tightening campaign has had so far. Failure to get to grips with the housing market will allow the government to meet this year’s development targets, including a goal of 6.5 per cent GDP growth. But it would leave big questions about the sustainability of this debt-intensive growth model.

The FTCR China Business Activity Index is a composite reading of business activity and sentiment based on our surveys of companies in the real estate, export and freight sectors. For individual survey methodologies click here. A full set of survey results can be found in our Database.

FT Confidential Research is an independent research service from the Financial Times, providing in-depth analysis of and statistical insight into China and Southeast Asia. Our team of researchers in these key markets combine findings from our proprietary surveys with on-the-ground research to provide predictive analysis for investors.