Brief China Economic Update – 10 September 2013

The most recent batch of partial economic indicators provide further evidence that China’s economy may be stabilising, supported by improved foreign demand and a shift in policy stance. There may have also been a delayed impact from rapid credit growth earlier in the year.

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The most recent batch of partial economic indicators provide further evidence that China’s economy may be stabilising, supported by improved foreign demand and a shift in policy stance. There may have also been a delayed impact from rapid credit growth earlier in the year, although tighter monetary conditions since June will be offsetting.

Domestic demand is tracking better. Industrial production, business investment and retail sales were all above expectations for the month, in line with our forecast for China’s growth to stabilise in the second half of 2013. Better than expected exports growth has been a welcome sign for the economy, although other big export oriented countries in the region have not been faring quite so well. Concerns over the coming US Fed tapering have also exposed vulnerabilities within emerging Asia, although the biggest problems have largely been restricted to the big deficit countries such as India. Nevertheless, indicators suggest that net foreign inflows have halted, contributing to tighter liquidity conditions within China that may weigh on domestic activity.

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