China’s National Bureau of Statistics (NBS) recently released economic data for October, which indicates a stage of general stability and continued recovery in critical areas of the economy. NBS noted that a series of international uncertainties would remain a variable.
On October 15, the National Bureau of Statistics of China (NBS) released its main economic indicators through October. Several indicators, namely value-added production of industry, retail sales, investment and employment, have shown that economic operations continue to maintain a recovery trend and that the main macroeconomic indicators are generally within a reasonable range.
Although the Chinese economy still faces challenges in the real estate sector, the good performance of exports and retail sales as well as the resumption of electricity shortages in the industry give reasons for confidence in the business climate. country investment.
In this article, we take a look at how China is navigating its “steady recovery,” discuss the challenges that exist, and what it all means for foreign investors.
Better than expected economic growth indicators
In general, the total value of merchandise imports and exports amounted to RMB 31,672.7 billion (about $ 4,955.13 billion), up 22.2% year-on-year in the first 10 month. Although the external environment has become more complex and vulnerable to various uncertainties since the start of 2021, China’s exports have exceeded expectations, providing a cushion for its economy. The total value of Chinese merchandise exports was RMB 1,940.8 billion (about $ 303.63 billion), registering a 20.3% year-on-year growth in October and an annual growth of 22.5% in the year. during the first 10 months, exceeding expectations.
Exports were boosted by global demand ahead of the winter break, reducing electricity shortages and resuming supply chains disrupted by new coronavirus outbreaks. China’s trade surplus of 545.9 billion RMB (about US $ 85.40 billion) in October was the highest on record – again above the expected US $ 65.55 billion. This is also a significant improvement from the surplus of US $ 66.76 billion recorded in September.
Market sales remained stable and increased, total retail sales of consumer goods reached RMB 4,045.4 billion (about $ 632.89 billion) in October, up 4.9% in year-on-year change, 0.5 percentage point higher than the previous month.
In general, total retail sales of consumer goods reached 35,851.1 billion RMB (about 5,608.83 billion US dollars) in the first 10 months, up 14.9% year-on-year. This was mainly due to online consumption.
A key economic indicator, industrial production, rose 3.5% year-on-year in October, beating economists’ forecasts. In the first 10 months, the total value added of industrial enterprises above the designated size increased 10.9% year-on-year, with a two-year average growth of 6.3%. Power shortages had been a major constraint on industrial production and eased in October, with electricity supply increasing 11.1% in October from a year earlier.
Real estate slowdown
Economic statistics are mixed on this front, as most areas have returned to pre-pandemic levels, while some areas remain vulnerable.
Investment in fixed assets rose 0.15% month-on-month in October. In the first 10 months of the year, growth in capital investment slowed to 6.1% as tighter restrictions on the real estate market continued to weigh on the industry. Of this total, real estate investment from January to October grew 7.2% year-on-year, 1.6 percentage points lower than the 8.8% growth observed from January to September 2021. The real estate recession has continued to weigh on output, with construction-related raw materials such as steel and iron. fall in production. For the fourth month in a row, investment in new buildings fell 7.7% from last year.
In recent months, the government has adopted a series of policies aimed at reducing income inequality, stabilizing the pursuit of rapid business growth targets, and curbing real estate speculation, among other things, to preserve the health of the economy. economy.
The challenges plaguing the sector include the debt accumulated by developers and home buyers. China Evergrande Group, the largest real estate developer in the country, is experiencing a serious liquidity crisis, which may be indicative of the current situation in the sector.
However, the slower growth is conducive to the stabilization of land prices and house prices, which is considered useful for the long-term development of the real estate market.
What to expect from China in Q4 2021?
On November 21, the China Macroeconomic Forum (CMF) pointed out that China’s macroeconomic recovery will continue in 2021. Real GDP is expected to increase 3.9% in the fourth quarter and annual economic growth. or 8.1%, reaching the annual growth target of over 6.0%.
The current Chinese economy is still on the road to recovery, neither normalizing nor stopping the recovery. However, it should also be noted that due to international uncertainties, the scope of domestic economic recovery is still limited.
In the short term, the possibility of rapidly reversing China’s economic recovery depends on the following 10 points:
- If the shortage of coal and electricity can be effectively solved.
- So the easing of mortgage policy can reverse the current downtrend.
- If the shortage of automotive chips can be alleviated.
- If the divergence in commodity prices will continue.
- If the winter domestic pandemic situation will change from sporadic epidemics to more severe clusters.
- Will the full manifestation of inflation in Europe and the United States lead to further growth in Chinese demand.
- Will the withdrawal of the United States from quantitative easing lead to adjustments in Chinese financial markets at the margin?
- So the various short-term bottlenecks faced by the global supply chain and the industrial chain have been medium-term.
- If macroeconomic policy has been repositioned as a whole.
- So campaign style policies can avoid conflicts with each other and avoid cascading costs on businesses.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors in China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the company for assistance in China at [email protected]
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