China economy shows signs of steadying, more policy support needed
China’s activity data was stronger than expected in November, with factory output growth picking up to a five-month high, signaling that a flurry of stimulus measures from Beijing may have put a floor under a fragile economy.
Still, analysts believe more policy steps are needed to weather nagging headwinds from a cooling property market, risks from high domestic debt levels, and weak global demand as financial markets brace for interest rate rises by the U.S. Federal Reserve.
“Real interest rates are still high due to falling producer prices,” Wang Jun, senior economist at the China Centre for International Economic Exchanges (CCIEE), a Beijing-based think-tank.
“It’s still necessary to cut interest rates to support economic growth and combat deflation.”
Factory output grew an annual 6.2 percent in November, data from the National Bureau of Statistics(NBS) showed, quickening from October’s 5.6 percent and beating expectations of 5.6 percent.
Growth in China’s fixed-asset investment, one of the main drivers of the economy, rose 10.2 percent in the first 11 months, unchanged from the gain in January-October, and higher than an expected 10.1 percent rise.
Retail sales grew an annual 11.2 percent in November – the strongest expansion this year – compared with 11.0 percent in October. Analysts had forecast 11.1 percent growth in November.
“While low base could be the factor driving the headline growth, we still have to acknowledge that China’s data are illustrating signs of stabilization, albeit at a low level,” said Zhao Hao, senior economist at Commerzbank in Singapore.
The data came after weak trade and inflation readings earlier this week, which underscored the persistent slack in the economy. Read more