China Economic Report - December 2012
Activity data for November suggest that China’s recovery is beginning to gain traction. Industrial output grew at a double-digit pace for the first time since March, and the monthly increase in rail cargo was the largest for 18 months. Retail sales growth also picked up, rising at the fastest pace for eight months.
The more recent monthly data suggests that the pick-up in growth will be slow and steady. December’s flash manufacturing PMI rose to 50.9 (a fourteen month high), with new domestic orders driving output in the sector. In addition bank lending has continued to rise, although the rate of increase slowed in November. And external demand is continuing to pick up, with the growth rate of exports accelerating in the three months to October.
We expect external demand to continue to improve gradually in the coming months as the Eurozone begins to recover and growth in the US picks up. And domestic demand will be stimulated by the recent monetary and fiscal policy loosening. As a result we expect GDP growth to gradually accelerate from 7.6% in 2012 to 8.1% in 2013 and 9% in 2014.
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