Chinese Monthly Update – September 2012

NAB’s Global Economic Research provides up to date commentary on global economic developments in the USA, Asia, New Zealand. China’s […]

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NAB’s Global Economic Research provides up to date commentary on global economic developments in the USA, Asia, New Zealand.

  • China’s partial economic indicators for the month suggest that conditions haven’t quite stabilised as expected, but neither have they deteriorated significantly. Our previous expectation that economic growth would remain unchanged from Q2 now looks unlikely.
  • Recent policy stimulus is yet to become apparent in Chinese economic data and the downturn in its export markets and problems in the construction sector continue to weigh on activity (although there have been signs of improvement in the real estate sector more recently). Industrial production growth eased to its slowest pace in three years. Chinese investment continues to grow at a very solid pace, although it does now appear to be moderating. In contrast, nominal retail sales are looking relatively more robust, however potential headwinds to income growth may start to weigh more heavily on consumer confidence.
  • The PBoC hasn’t taken further steps to loosen policy settings, preferring to rely on open market operations to manage liquidity conditions. Further monetary stimulus may be limited by concerns over reigniting price pressures, while additional QE by foreign central banks raises the risk of triggering ‘hot money’ inflows.
  • We have revised our forecast for China’s GDP growth slightly lower to 7½ per cent in 2012, reflecting the softer than expected Q3. Growth should start to pick up in 2013 as recent policy stimulus gains more traction.

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