China: Indicators point to marginally softer conditions post leadership change - NAB
|China’s new leadership was unveiled following the 19th National Congress in October – which provided President Xi greater influence over policy decisions and increased the likelihood that he will continue to lead the country beyond the end of his second term in 2022, explains Gerard Burg, Senior Economist at NAB.
Key Quotes
“While it is unlikely that the leadership changes will have a measurable impact on China’s economy in the short term, greater control may allow for a renewed focus on the stalled reform agenda outlined at 2013’s Third Plenum. The need for reform is becoming more urgent, as demographic pressures accelerate.”
“Growth in industrial production was a little weaker in October – at around 6.2% yoy (compared with 6.6% previously) – essentially back to the trend seen since the start of 2015. Crude steel output rose strongly, but this may reflect production being brought forward ahead of capacity closures between November and March.”
“Growth in China’s fixed asset investment edged marginally higher in October – rising by 5.8% yoy (compared with 5.7% previously) – although the overall trend has been weaker in recent months. Given the upturn in producer prices in recent months, real investment has been negative recently – down by around 0.9% in October (broadly similar to September). The softer trend for nominal investment has largely come from private sector firms.”
“China’s trade surplus widened considerably in October, at US$38.2 billion, as imports slowed significantly. Iron ore imports totalled 79.5 million tonnes in October (compared with 102.8 million tonnes previously), the lowest level since February 2016. This likely reflects destocking ahead of the shutdown of steel production capacity between November and March.”
“Growth in retail sales was a little softer in October. Given the uptick in inflation during the month, this pushed real retail sales lower – down to around 8.6% yoy (compared with 9.3% previously). Consumer confidence has continued to climb in recent months – up to 118.6 points in September (from 114.7 points previously). This level was the highest recorded since June 1995.”
“New credit issuance was somewhat weaker month-on-month in October – in line with typical seasonal trends related to the Golden Week holidays – but remained comparatively strong year-on-year, rising by 17.3%.”
“Monetary policy remains fairly stable, with the 7 day Shibor easing from just over 2.9% at the end of Golden Week back to around 2.85% at the time of writing. In the short term, we expect rates to remain around these levels. We believe there is limited downside risk – given the need to address high corporate debt levels and to manage capital flows – with the potential for an upside bias next year – particularly in response to movements from the US Federal Reserve.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.