NAB - China's Economy at a Glance
November 24 2016
China’s economic stability continued into October, however President Trump poses downside risks to the outlook
The unexpected election of Donald Trump as the next United States President provides greater downside risk to our forecasts – however the uncertainty around policy means that for now they are unchanged (6.5% growth in 2017, 6.25% in 2018). It is too early to know if election rhetoric will translate into policy. The proposal during the campaign to impose a 45% tariff on all Chinese imports to the United States would have a significant impact on China’s economy – but would also negatively impact the US.
China’s industrial production growth was unchanged in October – increasing by 6.1% yoy. Construction related industries – steel and cement – recorded stable growth.
Growth in China’s fixed asset investment edged a little higher in October, continuing to recover from very low levels in July. This growth is below the double digit levels of early 2016 and trend declines could resume in coming months. Private sector investment was further improved in October, but remains near historically low levels.
China’s trade surplus widened slightly in October – to US$49.1 billion. In monthly terms, both imports and exports were considerably weaker – however this largely reflected the impact of the Golden Week holidays at the start of the month.
Retail sales growth was weaker in October, increasing by 10.0% yoy (down from 10.7% in September). Given the strengthening in inflation this month, real retail sales fell from around 9.5% yoy to an estimated 8.9% – the slowest rate of growth since August 2004.
Headline inflation accelerated in October – with the Consumer Price Index increasing by 2.1% yoy. Producer prices rose comparatively strongly in October – rising by 1.2% yoy – the largest increase since December 2011.
New credit issuance was relatively modest in October – with aggregate financing totalling RMB 896 billion (down from RMB 1721 billion in September). The monthly decline was largely seasonal, reflecting the impact of the Golden Week holidays at the start of the month.