Brief China Economic Update – 18 January 2013

Today’s economic data releases for China came in broadly in line with expectations, providing evidence that the economic slowdown may have bottomed in the September quarter. The national accounts show that the economy expanded by 7.9% over the year to the December quarter, up from 7.6% in the June quarter, which is the first time growth has accelerated in two years. However, revised q-o-q growth rates suggest the economy’s growth momentum stabilised around the June quarter and has remained relatively steady; q-o-q growth was 2% in the quarter (from a 2.1% revised rate in Q3). The outcome was slightly stronger than our forecast for 7.6% y-o-y growth made late last year, largely reflecting the much stronger than expected foreign trade result. Average growth for 2012 came in at 7.8%,slightly stronger than our previous forecast of 7.7%. Note that all figures in this brief may change slightly once all revisions to the data are available. China’s partial economic indicators recorded some  improving trends over recent months, although some of the outcomes for December were a little mixed. Overall however, the trend appear to support our expectation for a continued recovery in GDP growth in H1 2013, assisted by ongoing government spending – although public investment appears to have slowed in December – and improving confidence in the real estate and external trade sectors. Consumption should also remain supportive.

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