Industrial output slows, retail surges
There were mixed signals of economic growth in November as industrial output and investment continued to slow in China, while retail sales surged, indicating a steady outlook despite a softer fourth quarter.
Industrial production, an important contributor to GDP, expanded 6.1 percent year on year in November, slowing from 6.2 percent growth in October due to tighter environmental rules, data from the National Bureau of Statistics showed yesterday.
That was higher than the estimate of 6 percent recorded in Reuters poll. It was the second-lowest in the year.
Boosted by the Singles Day online shopping promotion, retail sales of consumer goods grew 10.2 percent, up from October’s 10 percent. Sales at Alibaba, China’s largest e-commerce platform, hit a record high of 168.3 billion yuan (US$25.5 billion) on November 11.
In the January-November period, fixed-asset investment grew 7.2 percent year on year, down 0.1 percentage points from the January-October level.
Investment in property development rose 7.5 percent from a year earlier, edging down from 7.8 percent in the first 10 months, the bureau said.
As the government maintains property purchasing curbs to contain speculation, housing sales measured by floor area recorded a slower growth of 7.9 percent in the first 11 months.
Infrastructure investment, which accounts for more than 20 percent of the total FAI, surged 20.1 percent year on year for the January-November period, accelerating from 19.6 percent for the January-October period.
Mao Shengyong, spokesman for the bureau, said data showed that the Chinese economy was “very tenacious” as the results were achieved under a high base last year, uncertainties in the world’s economy, and progress in structural reforms and environment protection inspections.
“The country’s economy has remained steady and sound, and the trend will continue in 2018,” Mao said.
He said output of high-technology industries and equipment manufacturing rose nearly at twice the speed of overall industrial output, indicating that Chinese industrial sector was upgrading to a higher value chain.
Overall investment has been slower but funding into public wellbeing, innovation and high technology remained on track, Mao said.
“Chinese economy is on a positive stretch in all indicators including growth, public wellbeing, infrastructure and efficiency,” Mao said.
The bureau’s data showed that corporate leverage was down as large industrial firms saw their combined debt ratio fall 0.5 percentage points year on year to 55.7 percent by the end of November.
Employment remained stable against economic headwind as 12.9 million new jobs were created in cities during the January-November period, exceeding the annual target of 11 million.
Analysts said the steady economic growth will give policy-makers more leeway to control risks, reduce poverty and tackle pollution, which the central authorities have said were “the three tough battles” for 2018.
The importance of GDP growth target will be tuned down as the priority shifts to quality rather than quantity.
Tighter rules on polluting factories might weigh on production, while higher borrowing costs amid enhanced financial regulation and deleveraging efforts could also have an impact on economic activity.
UBS economist Wang Tao expects more impact from the ongoing clean air campaign to come in December and the first quarter of 2018, which along with a softening of infrastructure investment amid tighter local government financing rules and other supply-side structure reforms, should dampen GDP growth to 6.6 percent in the fourth quarter and 6.5 percent in the first quarter of 2018.
A document released last week after a meeting of the Political Bureau of the Communist Party of China Central Committee prioritized high-quality development that it said was “the fundamental requirement for determining the development path, making economic policies and conducting macro-economic regulation for the present and in the period to come.”
With current growth still robust, Wang expects macro-economic policy to stay unchanged in the next few months with no additional tightening policies.
Haitong Securities said the November data showed improving demand from the previous month, but production remained cool signaling softer economic growth in the fourth quarter.
The Bank of Communications said on Wednesday that China’s gross domestic product would grow at 6.5 percent over the next three years, and the average annual growth rate would be 5 percent between 2021 and 2035.
The bank said essential reforms should be made to cut capacity within the traditional high consumption industries, encourage innovation and advanced technology, expand opening-up process, balance regional economic development, and implement effective and prudent policies.
Economic indicators released earlier showed that consumer inflation was milder in November at 1.7 percent, and both import and export remained at double-digit growth.
China’s GDP grew 6.9 percent in the first three quarters, higher than the official annual target of 6.5 percent and last year’s growth of 6.7 percent.