Economic Indicators Signal China Recovery Underway
China’s economy may have just come back for a recovery, recent economic indicators signaled.
Latest data showed that China’s manufacturing activity rebounded in March to its highest mark since last August while non-manufacturing sector also reversed a downward trend since December.
Profits of China’s major industrial firms, which saw continuous decline last year, rose 4.8% Y-Y in the 1st 2 months of Y 2016.
Property investment also made notable improvement in the 1st 2 months of Y 2016, ending continuous deceleration of its growth over the past 2 years.
Even the stock market, which dived almost 50% since a peak last Summer, also saw moderate rebound in the past few weeks as the benchmark Shanghai index recovered the 3,000 point psych mark.
While most economic data, including the CPI (consumer prices index) and foreign trade, are yet to be released for March 2016, analysts are optimistic that most indexes will show upward momentum in the country’s economy.
“We expect the upcoming March economic data to show the start of a sequential rebound in real economic activity,” UBS said in a research note.
According to UBS, the country’s pillar real estate industry will report improved performance in March, with property sales likely to grow 5 to 10 percent year on year, continuing from a robust start seen in the first two months.
Inflation is also predicted to have picked up in March thanks to rising food price. UBS expected March CPI to rise 2.5% Y-Y, and raised its estimate of CPI to 1.9% for the whole year.
Concerns over capital outflow are also likely to ease alongside a stronger RMB Yuan, which gained by 1.4% Vs the USD in March.
As the potential cyclical recovery unfolds, profits of industrial firms, especially those of companies in the upstream and midstream, will improve further, said investment bank CICC.
China’s economy expanded 6.9% Y-Y in Y 2015, the slowest in 25 years.
To battle economic slowdown, the Chinese government has stepped up policy support including aiming for a higher fiscal deficit ratio and pro-growth easing in the money market.
The effect of intensified policy support has started to show, and recent credit pickup as well as concerted local government efforts to speed up property destocking is bringing indicators such as fixed asset investment back on an uptrend, UBS said.
As economic activity stabilizes, no more benchmark interest rate cut by the PBOC (the country’s central bank) is expected this year, it said.
Stay tuned…
Paul Ebeling
HeffX-LTN
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