China, Economists Expect Economy To Rebound In Q-2
Downward pressure on China’s economy may remain, but indicators are starting to show the economy stabilizing and the effects of supportive measures are beginning to take hold.
Mixed economic data for the 1st 2 months was released Saturday.
Industrial output grew below expectation, house sales improved and a fixed-asset investment picked up. These are good signs in an economy which has been slowed to allow for restructuring while overcapacity is pared.
“January and February activity data were mixed, but showed signs of growth stabilization and even a quicker recovery than expected in some pockets of the economy,” said Julia Wang, an HSBC economist.
Ms. Wang’s research note described the recovery in the property market as the “most positive sign.” Sales of residential property rose 28% in terms of floor space, and 43.6% in revenue terms, which compares very favorably with last year’s gains of 6.9% and 14.4% in the same period.
Property investment grew 3% Y-Y in the 1st 2 months, compared with a 2.1% decrease in December.
“Property investment appeared to have bottomed out, while infrastructure investment grew at a robust pace,” said Ms. Wang.
She expects urbanization policy to play a Key role in de-stocking in 3rd and 4th tier cities, maintaining the recovery in housing investment.
Shen Jianguang, chief economist of Mizuho Securities, attributed the rebound in property market mainly to the cuts in transaction taxes and interest rates.
Growth of fixed-asset investment as a whole, which picked up very slightly to 10.2 percent in the 1st 2 months, also showed “tentative signs” of stabilization.
“Given strong commitment to a more expansionary fiscal policy and a large backlog of approved projects, we expect infrastructure investment to remain a key growth driver in 2016,” said Wang of HSBC.
However, industrial production and retail sales data came in weaker than expected, with the former posting the lowest monthly growth since November of Y 2008, but behind the relatively weak data is some encouraging news.
Ms. Wang attributed the slower industrial output growth mainly to slower growth in heavy industries, mostly overcapacity sectors.
“Industrial production will likely be the most affected by efforts to cut overcapacity in 2016 given that the combined size of all sectors with overcapacity make up a third of total industrial output,” Wang added.
In contrast, output growth of the emerging and high-end industries is speeding up, which means economic restructuring is making progress. Production of new-energy vehicles, integrated circuits and industrial robots, rose 75.9, 12.6, and 17.7% respectively, .
With signs of stabilizing and a rebound in fixed-asset investment and property investment, China’s economy can be expected to rebound moderately in Q-2.
Stay tuned…
HeffX-LTN
Paul Ebeling
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