The Shrinking China Problem

20 January 2026

This week we could talk endlessly about Trump, Greenland and the race for resources, but we’re not. Let’s talk about China, a change in fortunes for Travel Companies and Property price forecasts. 

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Fresh data released on January 19^th (our time) highlighted a widening gap between headline GDP growth and underlying economic momentum, with demographics, deflation and investment weakness weighing on the outlook. Here is a quick summary:

• Births fell to a record low of 5.6 per 1,000 people, with just 7.9 million babies born, the worst reading since 1949. 

• Deflationary pressures persist, with economy-wide prices falling for an 11th straight quarter, the longest streak since the mid-1990s, even as nominal GDP growth lags real growth. 

• Fixed-asset investment contracted 3.8% in 2025, the first annual decline in nearly three decades, driven by a 17.2% collapse in property investment and tighter controls on local government debt. 

• Infrastructure investment fell 2.2% and manufacturing investment growth slowed sharply, reflecting policy caution around inefficient spending and capacity expansion. 

• Activity data remain mixed, with 2025 GDP growth meeting the 5% target, industrial output slightly beating expectations, but retail sales undershooting and steel output falling to its lowest level since 2018. 

We would argue the key takeaway is that more stimulus and policy changes are necessary to spark growth. And then we question whether any of this would help their share market? 

Well, we can see signs that the big end of the Chinese market are making a short-term top and downtrend which suggests the market is beginning to ask questions too.

Green shoots in the travel sector?

If you’ve travelled overseas lately you’d likely have noticed that the planes were well occupied. Australians exiting the country hit an all time high in 2025 and while incoming numbers were down slightly it wasn’t enough to dampen travel numbers..

And Flight Centre’s (FLT) share price reflects this.

The market clearly feeling that that the number of travellers mixed with their cost-cutting program which included the following:       

• Operational efficiency and productivity programs: Development of a Global Business Services (GBS) area to centralise and streamline processes, enhance efficiency and reduce operating costs.

• Portfolio rationalisation: Closure or repositioning of under-performing sub-brands and units such as StudentUniverse and The Travel Junction.

• Workforce and spending controls: Hiring freezes and tighter staff cost control, particularly in non-customer-facing roles.

• Capital discipline: Planned reductions in capital expenditure by 15–20% in FY26, prioritising key digital and growth projects while cutting discretionary spend.

And as the Financial Summary below shows, analysts are clearly expecting a very strong uplift in Net Profit in 2026 as a result.

Recently Morgans raised its target price to A$18.38 from A$15.65 and retaining its buy recommendation, citing undemanding trading multiples for the stock, which at 14.9x forecast earnings per share, we’d be inclined to agree with.

Property

Last week saw multiple reports of dwelling prices across the country, with combined capitals rising 8.2% over the 2025 calendar year. In December, prices rose 0.5% mom, even as Sydney and Melbourne slowed. All this making for a solid year for residential property investors.

Looking forwards, price growth should still outstrip inflation with Brisbane tipped to grow by 5% and Sydney tipped for the highest growth over 2026.

Surprisingly, Unit’s in Brisbane are tipped for the highest growth over the year ahead and lofty 13%. That’d more than cover your interest for the year.