China’s economy at a glance – November 2018
Trade impacts are yet to emerge, but mixed signals persist in China.
- Trends in China’s data remain quite mixed, with investment strengthening and retail spending weakening. We are yet to see any clear impact from US tariffs imposed in recent months (aside from weakness in manufacturing surveys). Our forecasts for China’s economic growth remain unchanged, at 6.6% in 2018, 6.25% in 2019 and 6.0% in 2020 .
- China’s industrial production grew marginally more strongly in October – increasing by 5.9% yoy, compared with 5.8% in September (which was the weakest increase since the opening two months of 2016). China’s major manufacturing surveys converged in October, as export conditions continue to worsen – a sign of impact from US-China trade tensions that is still to emerge in China’s physical trade data.
- The growth in China’s fixed asset investment picked up in October – with real investment rising by 5.6% yoy in October (from 3.3% in September). This increase may reflect the reduction of deleveraging evident during the third quarter.
- There remains no clear sign of negative impacts from US tariff measures, with China’s trade surplus expanding in October to US$34.0 billion (compared with US$31.3 billion previously). The overall value of both exports and imports was weaker month-on-month, in part reflecting the impact of the Golden Week holidays at the start of the month.
- In real terms, retail sales growth slowed further – down to 5.6% yoy (from 6.4% in September) – the slowest rate of growth since May 2003. The recent weakness in retail sales data has been in stark contrast to the strength in consumer confidence which, while off the peaks of early 2018, remains well above the levels seen over the past decade.
- New credit issuance was comparatively weak in October – with lending only around 60% of the total recorded in same period last year. While the deleveraging program appeared to slow over the third quarter, the weakness in October credit suggests that any broad financial stimulus has yet to start.
- Following a period of considerably volatility over the third quarter, the 7 day Shanghai Interbank Offered Rate (Shibor) was comparatively stable in October – fluctuating near the 2.6% mark. This represents an easing of around 20 to 25 basis points compared with the period between early 2017 and mid 2018.
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