Chinese economic activity data continued to show improvement in October, bolstering the view that the GDP will grow above 5.5 percent year-on-year in the fourth quarter, noted ANZ in a research report. Consumption growth is especially encouraging. On a year-on-year basis, the headline retail sales rose 4.3 percent, as compared with September’s 3.3 percent. Excluding auto sales, retail sales rose 3.6 percent year-on-year, rebounding from 2.4 percent in September. Durable goods including home appliances and furniture also turned positive, partially because of pent-up demand. The tertiary sector also extended the positive momentum, as evidenced by higher FAI growth in the sector. Overall, China’s post-COVID rebound has been well on track, independent of the development of a viable vaccine, said ANZ.
Meanwhile, property investment is unlikely to be sustained going forward. On a year-on-year basis, property investment growth rose 12.2 percent, accelerating from 11.9 percent in September, surpassing expectations. Property developers’ funding growth was also maintained at double digits in the month. Nevertheless, this trend is unlikely to continue over the longer term as the government’s recent deleveraging requirements pose downside risks to developers’ funding conditions and their investment outlook in quarters ahead, stated ANZ.
“As the negative output gap continues to narrow, China’s policy measures will continue to focus on reforms and risk control instead of stimulation. The Party’s 5th plenum has outlined China’s structural reforms for the future, so policymakers will adhere to the guidance, unless there are unanticipated negative shocks”, added ANZ.