China Watch
Group Economics Emerging Markets Research
17 December 2015
Year ends with better data, weaker yuan China’s economy ends 2015 on a more positive note
Arjen van Dijkhuizen
Merchandise imports show early signs of a bottoming-out
Senior Economist Tel: +31 20 628 8052 arjen.van.dijkhuizen@nl.abnamro.com
Weak exports followed by CNY regime change, more CNY weakness ahead ‘A fistful of dollars in FX reserves’ to keep depreciation pace in check
Gradual slowdown is base case; transition comes with occasional hiccups
Chinese economy ends 2015 on a more positive note While consumption remained robust in recent months, despite the sharp stock market correction in June/July, the latest data suggest that industry shows signs of stabilisation as previous stimulus measures are feeding into the economy. China’s activity data for November published in the past weeks have surprised on the upside. Industrial production growth accelerated to 6.2% yoy (Oct 5.6%), retail sales accelerated for the fourth month in a row (to 11.2% yoy) and fixed asset investment remained flat at 10.2% yoy. Earlier this month, data for imports, inflation, car production and car sales and lending data also pointed in that direction, although exports continue to disappoint. Bloomberg’s alternative GDP estimate jumped to 6.85% yoy in November (October: 6.57%), not far anymore from the official growth target (and our forecast) of 7.0% for 2015.
Bloomberg GDP estimate now close to official forecast
November activity data surprise on the upside % yoy (ytd)
% yoy
13
30 25
11
20 9
15
7
10 5 11
12
13
Industrial production Source: Thomson Reuters Datastream
14 Fixed investment
15
16
Retail sales
5 08
09
10
11
Real GDP growth (official)
12
13
14
15
Bloomberg GDP estimate
Source: Bloomberg
Will China’s imports bottom out in 2016? Although China’s economy undergoes a soft landing, what the rest of the world has experienced this year is quite a “hard landing” in terms of merchandise imports. These have contracted by on average 15% yoy so far this year. This is to a large extent caused by lower import prices, reflecting China’s large import demand for commodities and the
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