The 10.1% year-on-year increase in Chinese industrial production in November was the strongest rise for eight months. The Chinese Statistical Office also reported an eight-month high in retail sales, which were 14.9% up on a year earlier. Together with last month’s purchasing manager surveys, this all paints a picture of a slight acceleration in economic activity in the current quarter. Expansionary monetary and fiscal policy are evidently having an impact. Since the middle of the year the Chinese government has substantially ratcheted up approvals of major infrastructure projects This is likely to give a marked lift to public-sector investment activity next year as well. One of the few disappointments in November was on the foreign trade front. Exports were up a mere 2.9% on a year earlier, imports stagnated. One of the reasons behind the modest export figures might have been the strikes in twoUSports in late November/early December, through which some 40% of Chinese goods are imported into theUSA. In this context, the export figures for the months October to December are being/were possibly distorted.
All told, we are optimistic that, next year, the world’s second largest economy will be more dynamic than it has been for much of this year. We are expecting real growth of 8.3% in 2013, after an estimated 7.8% this year. In the short term the focus on public-sector investment to stimulate the economy might make sense. However, against this backdrop, one of the biggest challenges facing China, namely gearing the growth model in the future more towards private consumption and less on exports and investment, looks all the more pressing.