7/27/2019 SEB report: China growth rebound temporary
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China: Temporary growth reboundFRIDAY
OCTOBER 18, 2013
As expected, GDP growth accelerated in Q3, hitting 7.8 per cent
year-on-yearfollowing growth of 7.5 per cent in Q2. (Chart 1) The
rebound has been driven by state-led infrastructure spending.
However, policymakers are unlikely to welcome
anotherinvestment-driven surge; the rebound is expected to falter
in coming quarters along
with the slowdown in credit growth. We predict that GDP will
grow by7.7 per cent in2013 and 7.4 per cent in 2014. In 2015,
growth will decelerate to 7.0 per cent.
Both the official purchasing managers index (PMI) and the
Markit/HSBC index recoveredin August but levelled out in September,
raising questions about the durability of theeconomic rebound.
(Chart 2)
Exports were weaker than expected in September, falling 0.3 per
cent year-on-year.Some of the weakness can be explained by an
unfavourable base effect but otheremerging economies also showed a
similar trend. Imports rose by more than 7 per centyear-on-year.
(Chart 3) Relatively strong commodity imports support the view that
theeconomic rebound is driven by investment and infrastructure
construction.
Government infrastructure investments (mini stimulus) explain
much of the recenteconomic rebound,while manufacturing investment
is trending downward. (Chart 4)
Industrial production and retail sales have stabilised recently.
(Chart 5) Headline inflation accelerated to 3.1 per cent in
September, mainly driven by a rise in
food inflation that hit 6.1 per cent. Headline inflation is not
expected to rise muchfurther; food prices are stabilising and there
are no signs of price pressure elsewhere.Core inflation is still
below 2 per cent. (Chart 6)
The interbank liquidity situation has improved significantly
after the liquiditysqueeze engineered by the central bank in early
June. However, short-term rates are stillabove the pre-squeeze
level. (Chart 7)
New bank lending was CNY787 billion in September, an increase
compared to theprevious month. However, the broader total social
financing measure slowed, bothcompared to previous month and in
year-on-year terms.(Chart 8)
Unlike other Emerging Market currencies, the yuan(CNY) has not
been affected byFed tapering worries. (Chart 9) A large increase in
foreign exchange reserves in thethird quarter indicates that China
was a recipient of net capital inflows in Q3.
Andreas Johnson
SEB Economic Research
+46 8 763 80 32
[email protected]
Key data
Percentage change
2012 2013 2014 2015
GDP* 7.7 7.7 7.4 7.0
Inflation* 2.6 2.8 3.2 3.4
USD/CNY** 6.23 6.08 5.90 5.85
* Percentage change. ** End of period exchange rate.
Source: Macrobond, National Bureau of Statistics of China,
SEB.
