Overview

• The latest data from China show China’s economic recovery continued into the start of Q4, however consumption still remains below its pre-COVID-19 growth. Instead, growth continues to be driven by heavy industry, supported by construction demand. Overall, our forecasts are unchanged, with China’s economy to expand by 1.8% in 2020 and 9.5% in 2021.
• China’s industrial production grew at an unchanged rate in October – increasing by 6.9% yoy. This rate of increase is comparatively strong when compared with recent history, highlighting the sector’s key role in China’s post-COVID-19 growth.
• Real fixed asset investment increased strongly in October, up by 11.5% yoy. This was the strongest increase since May 2016. Private sector investment has grown more rapidly in recent months, as growth in real estate investment has continued to accelerate.
• Real retail sales increased by 4.6% yoy in October (up from 2.5% yoy in September), only the second positive reading in 2020. Retail sales growth remains below its pre-COVID-19 levels (particularly in nominal terms).
• China’s trade surplus widened significantly in October, reflecting a month-on-month drop in the value of the country’s imports. The surplus totalled US$58.4 billion (compared with US$37.0 billion in September). China’s trade surplus with the United States has been trending higher in recent months. The incoming Biden Administration in the United States is likely to be less aggressive on trade policy than President Trump, however it may pursue multi-lateral trade deals that could prove negative for China.
• In the first ten months of 2020, new credit issuance totalled RMB 31.0 trillion, an increase of 44.5% yoy. Bank loans account for the largest share of the total, however these loans have grown relatively slowly this year – increasing by 22.8% yoy to RMB 17.6 trillion.
• China’s monetary policy has remained stable since April, when the People’s Bank of China (PBoC) last cut its policy rate. Compared with other major economies, the PBoC has considerable policy room, however officials have stated repeatedly in recent months that current rates are appropriate – in part reflecting the longer term risks given existing high debt levels in the corporate sector and the potential for asset price bubbles.

For further details, please see China’s Economy at a Glance November 2020.