For the past number of decades, the growth story in the world was the one country as it transformed itself. China was the answer for everyone – for less expensive manufacturing, for commodity prices increasing, for a growing middle income group in China to stimulate consumer spending, for infrastructure projects that made the rest of the world envious, many things were happening in China. COVID happened and normal cycles happened which means China is an recession and wants to get out. The term recession has been a thing for years in China, but it happens and now the world can see what the economy is based on. Part of the economy was based on real estate (25% of GDP), but since 2008 most developed countries around the world can tell you real estate goes up in price and sometimes goes down.

In an article by Ellen Zhang and Kevin Yao of Reuters, China’s top leaders pledged to do implement policies to boost domestic demand or more stimulus is coming. China will focus on expanding domestic demand. boosting confidence and preventing risks.

China will strive to achieve its annual development targets of 5% growth, but there are risks that will be missed for the 2nd year in a row.

Capital Economics noted the lack of any major announcements of policy specifics does suggest a lack of urgency or that policy makers are struggling to come up with suitable measures to shore up growth.

The central bank is using policy tools such as the reserve requirements ratio (RRR) to whether the challenges facing the world’s 2nd largest economy.

Linking to dividend paying stocks, we all want to invest in stocks that continually grow both organically and buying other companies, but the reality is economic cycles happen which means both up and downside risks. The issue is always how well does the company perform when there are more downside risks than upside? does the company have the ability to rise prices and maintain and grow profits? As you do your homework, asking about the biggest risks to the company is a good thing to do.

There are more questions than answers, till the next time – to raising questions.