China’s economic recovery from the coronavirus crisis powered ahead in November as crucial indicators of activity rose at their fastest rates this year.
Industrial production increased 7 per cent year on year in November, edging up from 6.9 per cent a month earlier, while retail sales rose 5 per cent. Both metrics expanded more than in any other in 2020.
China’s economy returned to growth in the second quarter after a historic decline at the start of the year. The recovery has been stoked by the country’s industrial sector and strong export growth at a time when other big economies have foundered.
The comeback has allowed China to play a more dominant role in global trade, which also gathered pace last month. Exports rose 21.1 per cent in dollar terms in November, the biggest rise since February 2018, pushing China’s trade surplus to its highest level on record.
Retail sales growth was buoyed in November by “Singles’ Day”, the world’s biggest shopping festival. Gains in spending came despite concerns that consumption was lagging behind a wider recovery in China. The figure remains down 4.8 per cent in the first 11 months of the year compared with the same period in 2019.
Fixed asset investment, meanwhile, is up 2.6 per cent over the year to date, while in November the unemployment rate edged down to 5.2 per cent — the same level it was in December last year.
Ting Lu, chief China economist at Nomura, noted that the strong readings in November and momentum in to December added some “upside risk” to the bank’s forecast for 5.7 per cent real gross domestic product growth in the fourth quarter.
Oxford Economics on Tuesday upgraded its forecast for China’s full-year growth to 2.1 per cent, and expects growth of 8.1 per cent next year. Louis Kuijs, head of Asia economics at the consultancy, anticipated a tightening of policy to weigh on quarter-on-quarter growth next year.
“We expect the macro policy stance to shift from expansionary to contractionary, with the overall government deficit declining and monetary policymakers aiming to contain macro leverage,” he said.
Leverage has emerged as a concern for policymakers in China, with the government in August seeking to control borrowing in the real estate sector as house prices rose sharply. Over recent weeks, China’s credit market has also been rocked by a series of defaults.
New home prices in November rose just 0.1 per cent compared with a month earlier, but were still up 4 per cent year on year, official data this week showed.
Iris Pang, an economist for greater China at ING, said that while November’s data was the best of any month this year, there were still “hidden risks” facing the Chinese economy next year.
“The technology war will continue in 2021 even [while Joe] Biden is in office and there are more credit defaults continuing,” she said.
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