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Recent Chinese Economic Data

January 18, 2013 in China

Chinese data out in the past few days gives some cause for comfort.

Positive statistics covering retail sales, the housing market and industrial production indicate the country may be emerging from its economic trough, and their confluence probably provided a much-needed push to GDP growth.

GDP grew 7.9% year-on-year during the last quarter of 2012 and was ahead of analysts’ consensus forecast of 7.8%. On a full-year basis, however, the Chinese economy grew only 7.8%. This was the lowest rate of growth witnessed in 13 years, though it is still hugely better than that seen in other countries.

In the housing market new home prices showed a rising trend with data showing that 54 out of the 70 cities that were surveyed in December saw better prices for new homes.

December also saw much better industrial production which rose to 10.3%. This was the fourth consecutive month that the indicator showed positive growth.

In another positive reading retail sales during the month of December climbed 15.2% higher on a year-on-year basis.

On a disturbing note, however, the National Bureau of Statistics broke its more-than-decade long silence on statistics relating to income inequality in China. The commonly used statistic, the Gini coefficient, read 0.474 for 2012, and is considered a high reading of income inequality. It has been falling from a high of 0.491 in 2008, and read 0.477 in 2011. 0.400 is a cut-off level beyond which income inequality can cause serious social protest.

China’s Trade Balance – December 2012

January 10, 2013 in China

China reported a robust export performance in December that boosted its trade balance much beyond the consensus estimate.

The country’s trade balance for December was a positive $31.6 billion, rising 61% from the November surplus of $19.6 billion. Analysts had expected a surplus of only $20 billion.

Exports soared by 14.1% (y-on-y) while imports grew 6%.

Cumulative trade surplus achieved during the full year 2012 surged to $231.1 billion, a growth of over 48% over the 2011 level.

Though the country failed its target of achieving a growth of 10% in its trade volume (total of exports and imports), clocking only a 6.2% growth, Chinese authorities said the performance was creditable in the context of a slowing global economy and a domestic slowdown.

Chinese Yuan At 19 Years’ High

November 13, 2012 in China

Chinese Yuan hit the 6.2262 mark today against 1 dollar in Shanghai today. This is the highest level in past 19 years and reflects the improved confidence in the economy’s growth prospects.

CNY Versus U.S. Dollar – Historical Price Action


Chinese Yuan vs US Dollar - Historical rates

The Chinese currency was pegged to U.S. Dollar till 2005. In 2005 the Yuan was allowed to float against U.S. Dollar as well as other currencies but not freely. The earlier narrow range for permitted float in Yuan’s exchange rate of 0.5% was raised to 1% during April 2012. What it means that Yuan can fall or rise by maximum 1% during a single day’s trading.

During 2011 the total appreciation of Chinese Yuan was 5% against the U.S. Dollar.

Strong Yuan and Chinese Exports and Imports

A strong Yuan shows the improved confidence in economic growth but on the other hand makes Chinese exports costlier and is not good for the Chinese industrial sector. The Chinese imports will become cheaper and that is good for major exporting nations like Australia’s mining sector.

Chinese Economic Data – Encouraging Signs

November 12, 2012 in China

With the Japanese and the Euro-zone economies in the doldrums, and the fragile economic recovery in the US in grave danger from the ‘fiscal cliff,’ the fast-developing economies out of Asia will probably do the heavy lifting as far as global growth is concerned.

The Chinese economy has been a powerhouse of growth this decade, but of late there have been troubling signs of a slowdown in growth. The economy contracted over the last seven quarters on the trot – with growth down to a low (for China) 7.4% during the September quarter. Chinese policy-makers responded by implementing growth-oriented policies over the recent months, such as the lowering of the benchmark interest rate (twice) and reduction in the reserve requirement ratios (also twice).

In this backdrop, the recent economic data out of China has been comforting, to say the least.

October Exports

China delivered a resounding beat on estimates of its export performance for the month of October. Exports grew 11.6 % whereas analysts expected only 10% year-on-year.  This was the fastest rate of growth seen in five months.

The data led analysts to jettison fears of a ‘hard landing’ for the Chinese economy, and crank up their estimates for growth during 2013.

October imports

Imports by the Chinese economy were flat at 2.4% on an annual basis, and missed economists’ expectations of 3.2%. Interestingly, higher imports of agricultural products such as corn and edible oil counterbalanced declining imports of iron ore.

October trade balance

Higher exports and unchanged imports led to the trade surplus increasing to $31.99 billion compared to the previous reading of $27.67 billion and the $27.15 billion expected. This is the highest trade surplus recorded since January of 2009.

Consumer Price Index (October 2012)

China’s main gauge of inflation, the Consumer Price Index fell in October to 1.7% on an annual basis, the lowest reading seen in 33 months. The reading was down from 2% in August and 1.9% in September. The main reason for the fall was apparently food prices, which showed a lower trend.

The declining trend in inflation is an encouraging sign for the economy, as it strengthens policymakers’ hands in the pursuit of growth by lowering the interest rate regime, or other monetary easing or incentive measures.

Controlled inflation probably led to the People’s Bank of China pumping in a record amount of cash flow during the week ended November 1. Using repo operations the bank injected 379 billion Yuan as additional liquidity, an all-time weekly high, into the economy.

Producer Price Index (October 2012)

Chinese inflation at the wholesale level is measured by the Producer Price index. For October the PPI showed a fall of 2.8% on an annual basis compared to 3.6% in September. This was the eighth consecutive month for a decline in the PPI. However, since the rate of decline appears to be slowing, analysts are of the view that the economy may now be stabilizing. A declining wholesale inflation is also positive for the economy.

Fixed Assets Investment (October 2012)

Chinese fixed asset investment climbed 20.7% year-on-year to 29.25 trillion Yuan (about US$4.6 trillion). This was better than analysts’ expectations of 20.6% and the previous reading of 20.5%. The rising investment trend is a plus point for the economy

Industrial Production (October 2012)

After printing 8.9% in August, and 9.2% in September, the Chinese economy reported a heartening industrial production reading in October of 9.6% growth, beating expectations of 9.4%. This is likely evidence that the economy may have bottomed out after the downward trend seen over the last three years.

Retail Sales (October 2012)

In another encouraging sign of strength in the domestic economy, Chinese retail sales during October increased 14.5% compared to the same period last year, to 1.89 trillion Yuan and was the highest seen since March. Interestingly, the growth was more or less even between the urban and rural sectors – urban consumption rose 14.5% whereas the ruler population consumed 14.8% higher.

China Central Bank Outlook

The Chinese central bank reviewed the economy at its third-quarter monetary policy meeting and said, “Current economic and financial operations have shown signs of stabilizing and consumer prices are basically stable.” The statement of the bank also said it would continue to use monetary means for growing credit in the economy at a reasonable pace, and in line with objectives of social financing. However, it expressed concern over the likely import of inflation due to the massive monetary easing measures in the US and European economies. In sum the bank said, “We will continue to implement the prudent monetary policy, make it more targeted, flexible and forward-looking, while fine-tuning it according to the economic situation development.”

China – What to Expect

Looking at the above data trend, it does appear that the Chinese economy may be turning around, slowly, just like a huge tanker that takes a while to change course in the other direction. Rising exports, manufacturing and retail spending in an environment of relatively flat inflation and a dovish central bank stance lead us to the hopeful conclusion that China may yet return to its normal growth levels and lend a hand supporting global growth.

Economic Data From China Comes Mixed But Indicate Better Than Expected Growth

November 9, 2012 in China

China economic data

Today’s economic releases from China brings a mixed outlook but indicates better growth than expected. On one side the prices fell more than expected but the consumer spending, spending on infrastructure and industrial production rose unexpectedly.



Consumer Price index Drops:China - consumer price index

Consumer price index fell unexpectedly in China. The year to year change in the CPI in October was 1.7%, which was 0.2% less than the CPI data of September which was 1.9%. The consensus of economists was that it would remain same in October. Same was the case with the month on month change in the CPI, which dropped unexpectedly to -0.1% in October against the September’s 0.3%. The consensus was for 0.1%.

Producer Price Index Fell:

The year on year change in the producer price index in October 2012 -2.8%. It was slightly less than the consensus of -2.7% but was better than Septembers year on year change of -3.6%.

China industrial production

Industrial Production Up:

Industrial production in China grew unexpectedly. In October the year on year rise in the Chinese industrial production was 9.6% which was much better than September’s 9.2% and also better than the consensus of 9.4%.

Stronger Retail Sales:China retail sales

Retail Sales in October jumped up again. The year on year retail sales change was 14.5% against the previous 14.2%. Consensus was for a slight drop to 14.0%.

Chinese Infrastructure and urban investmentRise in Urban Investment:

Spending in construction activities and purchase of fixed assets also rose in the month of October to indicate better than expected economic growth. The year to date urban investment as year to year comparison basis came out to be 20.7% against the previous 20.5%. It was expected to have a slight rise to 20.6%


Economic Data From China Comes Better Than Expected

October 18, 2012 in China

Today’s economic data from China came out to be better than the expectations.

China GDP Growth:

Today’s data showed an expected decline in the year on year GDP growth during the 3rd quarter. The previous change was 7.6% and the consensus was for a drop to 7.4% and released figure was in line with the consensus. On the other hand the quarter on quarter change in the GDP during the 3rd quarter was 2.2% and was quite better than the expectations and also the previous change of 1.8%.

Chinese Industrial Production

The industrial production in China rose in September. The year on year growth in the industrial production came out to be 9.2% while the expectations were for 9.0% i.e. slightly better than the previous change of 8.9%.

Retail Sales

Chinese Retail Sales again jumped up in September. The economic data for retail sales showed a jump of 14.2% against the previous year’s figure of 13.2%. The consensus was that the growth will remain the same.

Urban Investment

The year to date Urban investment on year on year basis also saw a rise like GDP. The figure was 20.5% and came out as positive as compared to the expectations and previous 20.2%.

What to Expect:

The commodity currencies like Australian and Canadian Dollars should get further strength and the recent trend of change in the AUD and CAD pairs should continue.