Fitch Ratings said that it expect China's weak property market to remain a drag on issuers' performance in several sectors over the second half of 2024.
The rating agency also noted that allowing local governments to use proceeds from special purpose bond (SPB) issuance to purchase unsold housing stock could mark a step-change in China’s approach to managing the downturn in the country's property sector. However, Fitch added that the limited uptake of existing financing schemes supports its view that returns and cash flow from social housing are insufficient to service their associated debt, limiting their effective deployment.
In addition, Fitch Ratings said that weakness in the Chinese property market is expected to impact several sectors, including cement and steel production, which will suffer due to soft demand and weak margins. Meanwhile, sectors less linked to property, in Fitch's opinion, have brighter prospects. In particular, aluminium output is believed to continue to increase, led by strong manufacturing activity, as previously curtailed and new capacity ramps up while electricity demand will remain bolstered by strong demand from manufacturing, electric vehicles, power charging and data centres.