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China economy starts 2018 on solid trajectory after industrial profits dip

Robust economic data give it room to reform without as much worry the overhaul may undermine growth


Photo: Reuters
Photo: Reuters

As the latest data showed some softening at the end of an upbeat year, reports for this month are looking likely to show the keeping pace despite slowing industrial The earliest indicators for January show momentum remains intact, with sales managers the most upbeat since July, financial experts more optimistic, and satellite imagery signaling manufacturing conditions are improving for the first time in four months. That reading is in line with forecasts that both main factory gauges remained at solidly expansionary levels. “The strong momentum will likely be carried over to the first quarter, with the being supported by strong external demand and domestic consumption,” said Xia Le, chief Asia economist at in “The risk factor is deleveraging, as the market is still underestimating how tough it could be as shifts its focus to the quality rather than speed of the growth.” Such a transition was Beijing’s main message to the world this week as Liu He, President Xi Jinping’s chief economic adviser, told financial and political elites in that is moving to upgrade its output rather than simply hit numerical targets. Robust economic data give it room to reform without as much worry the overhaul may undermine growth. Meanwhile, not all arrows point up. Data released Friday showed industrial rose 10.8 per cent in December, the slowest pace in a year.

The early indicators aren’t all sanguine either: the outlook is slightly dimmer for smaller enterprises and sentiment in the steel business has been deteriorating. “Weaker demand has started to weigh on production, while investment appetite has been sluggish,” Standard Chartered Plc economist Shen Lan wrote in a recent report. More headwinds and less accommodative policies are poised to weigh on the economic expansion in the first quarter, she added. The economic calendar will be a little lighter than usual next month as the country celebrates the Lunar New Year holiday with a week-long break. Industrial production, fixed-asset investment, retail sales and industrial won’t be released during February. “The will probably continue to run well in the first quarter,” though financial reforms pose risks, said Iris Pang, an economist at ING Groep NV in “Salaries are rising, which is a good support for consumption of goods and services, and infrastructure investments and shantytown restructuring would also support fixed-asset investment.” Early indicators for January

  • A gauge of sentiment among sales managers rose to a six-month high of 52.5 in January from 52.1 in December, according to a survey by Readings above 50 signal conditions are improving
  • The Satellite Manufacturing Index rebounded to 51.8 in January from 50.8. The gauge tracks commercial satellite imagery to gauge activity levels across thousands of industrial sites
  • Standard Chartered’s Small and Medium Enterprise Confidence Index softened for a second month, falling to 53.8 in January from 55.3 in December, according to the bank’s survey of hundreds of companies nationwide
  • Sentiment among financial market experts rebounded from the lowest level since February 2016. The survey by the Economic Panel showed 12-month expectations improved to 1.1 from minus 10.7 in December

First Published: Sat, January 27 2018. 23:47 IST