David Mahon: How tensions with the US are a factor dampening Chinese consumer confidence

Of Interest

The Chinese people are very concerned about their country's tense relationship with the United States and it's a factor in weak consumer confidence, says Beijing-based David Mahon.

Mahon, a New Zealander who has lived in China since 1984, is Managing Director of Mahon China Investment Management. He spoke to interest.co.nz in the latest episode of our Of Interest podcast.

Mahon says during a recent visit to a mountain village in Yunnan Province, one of the more remote places in China, he had dinner with local officials. This highlighted worry about ongoing tensions with the US.

"All were asking me about why is it America wants a war with China. They are concerned with the tension they could sense. It worried them for their own futures, their kids, their own prosperity," Mahon says.

"If people living as remotely from the centres of power and commerce are concerned about a dynamic like that, it shows all of China is concerned. It is a factor of the low consumer confidence at the moment."

Mahon says the Chinese economy's "probably more complex than I can remember."

"There's a lack of confidence, consumers are not going back to buying and investing as they were and the Government is now struggling to reset things as far as it feels it needs it must to get demand back on track."

"China's not in the doldrums but there are a patchwork of doldrums across the country," says Mahon.

Nonetheless Mahon says by the second quarter next year "all these major concerns and these doubts about the Chinese economy will be being put to one side." And whilst there's a challenging 12 to 18 months for New Zealand dairy exports to China and Fonterra, with China sitting on more than 500,000 metric tonnes of whole milk powder in storage, there are good times ahead, which will be helped when all NZ dairy exports to China become tariff free from the start of 2024.

In the podcast Mahon also talks about China's efforts to become carbon neutral, why he thinks deflation fears are overdone, what's gong on with China's property sector, the importance of the Chinese middle class, what the Chinese Communist Party needs to do to shore up the tacit support of the people, why tax changes are needed, recent floods, and more.

*You can find all episodes of the Of Interest podcast here, including two previous ones featuring David Mahon.