A Short-Term Stabilisation, and More Headwinds Still on the Road

Economic Research	14 November 2016
China
Economic Highlights
A Short-Term Stabilisation, and More Headwinds Still on the Road China’s retails sales growth missed market expectation due to a high base effect for automobile consumption, but investment surprised the market on the upside given rising infrastructure investment and pick-up of PPP projects. Rapid growing commodity prices also somehow encouraged certain traditional industries to enlarge scale of production. But looking ahead, we do not believe such growth is sustainable, as we have not identified solid demand recovery. More specifically, we have already observed slowdowns in terms of property sales, steel production and coal consumption in power plants in early Nov 2016. As such, we believe it is just a short term stabilisation and more headwinds are still on the road. On the policy front, stabilising economy, weakening CNY and booming asset bubbles will make central government to stay with a prudent stance, and the government will rely more on targeted fiscal stimulus, in our view. Economist:  Zhang Fan| +8621 6288 9611 ext 105
To access our recent reports please click on the links below: 09 Nov: Low Base Effect Resulted in Rising CPI and Growth to Remain Mild 08 Nov: Little Improvement in Overall Demand 02 Nov: Preview: A Stabilising Economy, But Long-Term Pain Persists 01 Nov: Stabilised Industrial Sectors Signal More Focus on Reforms 19 Oct: Little Surprise, While Underlying Problems Remain 14 Oct: First PPI Expansion in 55 Months