China Monthly Economic Update – 29 January 2013

National accounts for the December quarter came in slightly stronger than expected, suggesting the economy has achieved a soft landing, at least for now. Real GDP growth rose to 7.9% yoy, ending seven consecutive quarters of slowing growth. Growth for the year came in at 7.8%

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  • National accounts for the December quarter came in slightly stronger than expected, suggesting the economy has achieved a soft landing, at least for now. Real GDP growth rose to 7.9% yoy, ending seven consecutive quarters of slowing growth. Growth for the year came in at 7.8%, the slowest pace in 12 years.
  • Partial economic indicators for December show that China’s economy has improved, although outcomes are still quite mixed. Year-ended growth in production, nominal retail sales and exports accelerated. Fixed investment has increased strongly, but the pace eased in December in line with softer real estate and central government investment growth.
  • CPI inflation remains well within acceptable levels, but improving activity suggests further interest rate cuts are unlikely. However, we haven’t ruled out the chances of a 50bp cut to reserve requirements in Q1 this year.
  • We have revised our forecast for China’s GDP growth up to 8¼% in 2013 (from 8%), but we expect growth to ease in subsequent years.

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