China’s Economic Activity: A Comprehensive Analysis

Broker Name: UOB Kay Hian

Date of Report: November 18, 2024

Overview of China’s Economic Performance

In the latest economic report from UOB Kay Hian, the overall economic activity in China for October 2024 has shown signs of stabilization, despite ongoing challenges in the real estate sector. The industrial production, retail sales, and fixed asset investments (FAI) present a mixed yet insightful picture of the current economic landscape.

Industrial Production: Resilience Amidst Challenges

Industrial production growth in October moderated slightly to 5.3% year-on-year (yoy), falling short of the previous month’s 5.4% yoy and the Bloomberg consensus of 5.6% yoy. Notably, 35 out of 41 major industries recorded positive yoy growth. The manufacturing sector, especially in computers, communications, and electronic equipment, showed a notable increase of 10.5% yoy. However, sectors like railway, ship, aerospace, and heat production & supply saw significant decreases. Despite these challenges, industrial production is expected to remain resilient due to domestic fiscal stimulus.

Retail Sales: A Surge Driven by Key Sectors

Retail sales growth accelerated to 4.8% yoy in October, a marked improvement from September’s 3.2% yoy and surpassing the Bloomberg consensus of 3.8%. This growth was primarily driven by a significant boost in cosmetics and household appliances, with yoy increases of 40.1% and 39.2% respectively. Cultural & office goods, communication appliances, and grain, oil, and foodstuff also performed well. The positive trend in retail sales is encouraging, though a sustained recovery will depend on effective demand-side measures.

Fixed Asset Investment: Stability with Underlying Concerns

The FAI year-to-date (ytd) growth remained steady at 3.4% yoy, slightly below the Bloomberg consensus of 3.5% yoy. Infrastructure FAI ytd growth rebounded to 4.3% yoy, while manufacturing ytd growth edged higher to 9.3% in October. However, property FAI ytd continued to contract, showing a negative growth of 10.3% yoy, highlighting ongoing challenges in the real estate sector. The implementation of the destocking policy has yet to show a meaningful impact, necessitating further efforts to accelerate its execution.

Real Estate Sector: A Lingering Challenge

The real estate sector remains a significant drag on China’s economic performance. Despite efforts to stabilize growth, property FAI ytd has deteriorated further, underscoring the need for more effective policy measures to address the sector’s challenges.

Conclusion

Overall, the October economic data indicates a possible stabilization of growth momentum with a slight improvement in the unemployment rate. However, further efforts are required to bolster growth, considering rising geopolitical risks and the potential for another trade war with the United States.

For more detailed insights and analysis, readers are encouraged to contact UOB Kay Hian directly.