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The report stated that the China story may now be facing clear headwinds and India is likely to benefit from such stark realities over the longer term
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India is likely to be the beneficiary as China slows down in terms of new investment intentions, said the State Bank of India (SBI) on Tuesday in its research report.
While talking about China's worsening construction bubble, the report mentioned that Apple's recent decision to shift part production of the iPhone 14 model for worldwide shipping from India, with a negligible time lag of a few weeks posts its slated launch on September 7, bears testimony to such optimism.
"The move by Apple, the most recognisable face of tech-infused innovation in the last two centuries, that captures aspirations of an upwardly mobile population should open the floodgates for other major conglomerates to follow suit," it stated.
Interestingly, even as China is grappling with a meltdown in the construction sector, housing unit sales in India in H1 2022 (Jan-June) have reached the highest level since H12013.
Low-interest rates and comparatively low home prices along with the renewed need for home ownership sparked by the pandemic, have been the primary drivers of this growth.
Growing by 60 per cent in YoY terms, the sale of 158,705 units during H1 2022, was 19 per cent higher than the preceding period of H2 2021 in seven major cities, the report mentioned.
While talking about India, it said that equity and currency markets, though having reacted adversely were quick to recoup some of the losses in subsequent trades, with portfolio inflows turning positive even though they were marginal at USD 30 million on August 29.
The overall portfolio inflows since July 29 is now USD 7.6 billion, as against an outflow of USD 14.7 billion in FY23 prior to July 29, it added.
"Clearly, India seems to be enjoying the TINA (there is no alternative) factor, as globally all countries are facing the churn and India seems to be the best-placed jurisdiction in terms of growth and inflation outlook in FY23," as per the report.
The report also stated that the China story may now be facing clear headwinds and India is likely to benefit from such stark realities over the longer term.
The trends in prices of both retail and commercial real estate in China now show a much deeper structural adjustment. The long-term trends in retail prices show that since 2016, prices have been steadily declining along the linear trend.
In 2022, even the nominal price index has witnessed degrowth which is a worrying sign. The real price index growth has been in negative growth since December 2021. Home sales in China have fallen for 11 months in a row, official data shows. That is the longest slump since China created a private property market in the late 1990s.
Chinese demographers are now predicting that negative population growth in China will be the dominant trend in the coming years for a long time and improving the overall quality of the population and changing economic development plans are vital to address the problem.
With ageing, the size of the family will gradually shrink. The housing demand will eventually decline in the long run in China as seen in Japan, the report highlighted.
"In the future outlook of the construction sector in China over the long run structural factors such as demographic ageing and rebalancing of the economy will eventually remove a substantial portion of demand," it said.