China Economic Briefing – 12 December 2014

There is a growing expectation that China’s Central Economic Work Conference will lower China’s economic growth target for 2015 – down from this year’s ‘about 7.5%’ to 7.0% – however this change may not be officially announced until the National People’s Congress meets next March.

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Industrial trends soft in November, growth in 2015 likely lower

China’s Central Economic Work Conference occurred this week, the annual closed door meeting where policy makers set the country’s economic agenda. There is a growing expectation that the meeting will lower China’s economic growth target for 2015 – down from this year’s ‘about 7.5%’ to 7.0% – however this change may not be officially announced until the National People’s Congress meets next March.

Growth of 7.0% in 2015 – which remains our forecast – would be the slowest rate of growth since 1990. China’s growth is forecast to ease further to 6.8% in 2016.

Growth in industrial production slowed noticeably in November, with output rising by 7.2% yoy (compared with 7.7% in October). The APEC conference – held in Beijing in early November – may have negatively impacted industrial activity, with much of Hebei’s steel sector (among other industries) cutting output to reduce pollution during the event.

For the second straight month, China’s fixed asset investment strengthened – rising by 14.9% yoy (compared with 14.4% in October). Falling prices for key inputs – such as steel – has limited recent declines in real investment, with this measure growing by 17.3% yoy in November (up from 16.8% previously).

That said, investment in real estate continued to weaken – with growth slowing to 9.3% yoy (from 10.1% last month) – weaker than at any point since the GFC. Investment in the manufacturing sector was relatively stable, at 10.2% yoy, compared with 10.0% previously.

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