Why China’s Central Bankers Are Still Worried

After a tumultuous 2021 marked by near-disaster in the property sector and a widening crackdown on other previously fast-growing industries such as internet technology, China’s economy demonstrated a bit of spark Monday. New figures showed fourth-quarter growth at 4% year over year, slower than the third quarter’s 4.9% but still well above the 3.3% consensus estimate among economists polled by FactSet.

Still, policy makers clearly don’t see much to celebrate: On Monday the People’s Bank of China also announced a 0.1 percentage point cut to two of its key policy rates.

The upbeat data shouldn’t be so surprising, particularly for October and November. Although China’s economy still struggled in the fourth quarter, it benefited from the absence of two big problems from the third quarter: the midsummer Delta variant outbreak and late summer power shortages. Resilient exports supported manufacturing investment, and the slow trickle of monetary easing since July appears to have helped stabilize weak infrastructure investment.

Single-month December data released alongside gross domestic product was largely bad, however, particularly for consumers and the all-important housing sector. Retail sales rose just 1.7% year over year, the weakest growth in over a year. And with China still fighting multiple Covid-19 outbreaks in mid-January—including some linked to the hyper-contagious Omicron variant—the prospects for January and February look bleak too.

More worrying, mortgage lending appears to have retreated in December, after a noticeable bump in November: Growth in seasonally adjusted medium- and long-term loans to households slowed to 9.5% from 14.3% month on month annualized, according to Goldman Sachs. Housing sales also fell back. With infrastructure investment still struggling to accelerate and consumers hunkering down, it is difficult to imagine a floor for overall Chinese growth without more definitive signs of a bottom in real estate.

Even after today’s modest policy rate cuts, monetary easing so far still looks conservative compared with past cycles—and many market rates are still relatively high. More help will be needed to head off a deeper slowdown in the first half of 2022.

LONDON— Anglo American on Friday rejected a $39 billion takeover proposal from rival BHP, saying the bid “significantly undervalues” the company and setting the stage for a potential bidding war.

London-listed Anglo American said the unsolicited proposal, which was made earlier this month and which became public this week, features an unattractive structure that is too uncertain and complex .

Anglo American Chairman Stuart Chambers said the company stands to benefit from its portfolio of assets, including copper, that are likely to experience growth from trends around the energy transition. BHP’s bid, Chambers said, is opportunistic and dilutive for shareholders.

BHP’s all-share offer valued Anglo American at about $38.8 billion, and would have been contingent upon Anglo American spinning off shareholdings in two South African-listed units. The proposal represented a premium of about 31%, not including the South African-listed units, based on Tuesday’s closing prices.

Some analysts had predicted Anglo would find the bid too low and are expecting BHP to return with another. BHP has until May 22 to make a firm offer, though the deadline can be extended. Industry participants expect other large miners to also take a run at Anglo, whose share price has dropped since 2022 as lower commodity prices have ripped through the industry.

A tie-up between BHP and Anglo American, which would be the largest mining deal on record, would illustrate the growing importance of copper, a metal essential to clean-energy products , to a sector that has long relied on Chinese industrialisation to boost profits.

Copper represents some 30% of Anglo American’s output, while BHP counts a majority stake in Chile’s Escondida, the world’s biggest copper mine, among its assets. BHP bought Australian copper-and-gold miner Oz Minerals for $6.34 billion in May last year, representing its biggest acquisition since 2011.

Copper prices are up some 15% so far this year, reflecting expectations that demand for the metal will rise as the world decarbonises and supply will be constrained. Electric vehicles and wind farms use copper in much greater quantities than gasoline-powered cars and coal-fired power stations.

Anglo American has been reviewing its assets in recent months, and has held early conversations with potential buyers for its storied De Beers diamond unit, which it values at more than $7 billion, The Wall Street Journal reported Thursday.

Activist firm Elliott Investment Management holds a stake in Anglo American worth roughly $1 billion, accumulated over several months and before BHP’s move on the miner, according to a person familiar with the matter. The firm is widely known for its campaigns to push companies for change to boost their stock prices. Its view of the Anglo American holding couldn’t be learned.

That said, a jump in Anglo American’s share price following BHP’s takeover offer indicates Elliott has already profited from its holding, potentially reducing any incentive for it to take any action until the outcome of BHP’s bid becomes clearer.

Anglo’s stock on Friday traded above the implied value of BHP’s offer, indicating the market expects a higher bid to emerge.

Why China’s Central Bankers Are Still Worried

China’s economy grew 4% from a year earlier in the fourth quarter—faster than expected.

U.K.-listed mining giant’s chairman says the proposal undervalues the company