China shows positive signs, more policy support needed
ASSETS INVESTMENT RISES HIGHER THAN EXPECTED TO 10.2% IN THE FIRST 11 MONTHS Retail sales grew an annual 11.2 per cent in November — the strongest expansion this year.
China’s activity data was stronger than expected in November, with factory output growth picking up to a five-month high, signalling that a flurry of stimulus measures from Beijing may have put a floor under a fragile economy.
Still, analysts believe more policy steps are needed to weather nagging headwinds from a cooling property market, risks from high domestic debt levels, and weak global demand as financial markets brace for interest rate rises by the US Federal Reserve.
“Real interest rates are still high due to falling producer prices,” Wang Jun, senior economist at the China Centre for International Economic Exchanges (CCIEE), a Beijingbased think tank. “It’s still necessary to cut interest rates to support economic growth and combat deflation.” Factory output grew an annual 6.2 per cent in November, data from the National Bureau of Statistics (NBS) showed, quickening from October’s 5.6 per cent and beating expectations of 5.6 per cent.
Growth in China’s fixed assets investment rose 10.2 per cent in the first 11 months, unchanged from the gain in January-October, and higher than an expected 10.1 per cent rise.
Retail sales grew an annual 11.2 per cent in November compared with 11.0 per cent in October. Analysts had forecast 11.1 per cent growth in November.
“While low base could be the factor driving the headline growth, we still have to acknowledge that China’s data are illustrating signs of stabilisation, albeit at a low level,” said Zhao Hao, senior economist at Commerzbank in Singapore. The data came after weak trade and inflation readings earlier this week, which underscored the persistent slack in the economy.
The world’s second-biggest economy has been hit by weak demand at home and abroad, factory overcapacity and challenges posed by its transition to a consumption-led growth model from one reliant on investments.
With the Fed poised to raise interest rates for the first time in almost a decade at next week’s review, the risk of intensifying capital outflows has added to Beijing’s policy challenge.