Economic recovery and property in smaller cities boost household confidence

Chinese household confidence has rebounded to a two-year-high, boosted byeconomic recovery and strong property sales in smaller cities, a survey revealed.

Experts from the Bank of Communications and Nielson introduce results of the latest China Wealth Index, which rose 5 points from May to 140, a two-year high.

Chinese household confidence rebounded to a two-year-high on economic recovery and strong real estate market in smaller cities, a survey revealed on Monday.

The China Wealth Index, compiled every two months by Bank of Communications and the research firm Nielsen, rose to 140 in July from May’s 135, which was the second highest on record.

A reading above 100 reflects optimism among over 1,800 households interviewed.

A sub-index measuring people’s willingness to invest in real estate rose for the first time in eight months along with strong home sales in June.

“Home sales in smaller cities rose as policies to boost home purchase in these destinations took effect,” said Lian Ping, chief economist of the Bank of Communications. “But it is questionable whether the recovery is sustainable.”

Lian said home prices in smaller cities are generally reasonable and banks are expected to approve more mortgages in smaller cities as buying a home  is restricted in large cities.

Monetary authorities’ stance of “mild deleveraging” also boosts investment sentiment in real estate as well as the financial market.

A sub-index measuring people’s willingness to invest in liquid assets, including wealth-management products, securities, insurance policies and precious metals, rose 6 points to 141.

Households expected their income to improve mainly due to higher investment returns as a sub index measuring income growth increased 5 points from May to 152.

Meanwhile, people's confidence over the economy also rose 6 points to 138, the highest since 2015.

Official data showed that China's second-quarter GDP rose than a better-than-expected 6.9 percent year on year, the same pace as the first quarter.

International organizations including the International Monetary Fund, J.P. Morgan, Nomura Securities, Asia Development Bank, and Standard Chartered Bank tuned up forecast of China's GDP growth for the year by between 0.1 to 0.2 percentage points.

But latest data showed that pressure remained as China's official manufacturing Purchasing Managers Index fell to 51.4 in July from 51.7 in June, said the National Bureau of Statistics last week.

Economists attributed the decline largely to hot weather and flooding, and said a positive economic outlook remained unchanged.

The official data also showed China's non-manufacturing sector expanding at a slower pace in July, with the non-manufacturing PMI moderating to 54.5 from June's 54.9.

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