China's economy hits turning point
No need for any big injection of stimulus, says economist as October data shows a broad-based turnaround in production and retail sales
The mainland economy improved more than expected last month after inflation dipped to a 33-month low, reducing the likelihood of "big bang" stimulus measures after the new leadership takes office.
Industrial output expanded 9.6 per cent from a year ago, while consumer inflation decelerated to 1.7 per cent year on year, the National Bureau of Statistics (NBS) said yesterday.
The October data confirmed that China's economic slowing has "truly bottomed out", said Lu Ting, an economist at Bank of America Merrill Lynch.
"We expect more easing measures in the near future, but no big-bang stimulus."
The October figures would "give people confidence" in the world's second-largest economy, Ma Jiantang, head of the statistics bureau said on Thursday on the sidelines of the Communist Party's 18th national congress.
Yi Gang, vice-governor of the People's Bank of China, said on Thursday that the economy had been stabilising and was set to bounce back.
The Shanghai Composite Index dropped 0.12 per cent yesterday amid political uncertainties before the once-in-a-decade leadership transition. The Hang Seng Index lost 0.85 per cent.
The mainland economy has slowed for seven quarters as exports were hurt by the European debt crisis and domestic demand was subdued by curbs to cool the property market.
The turnaround was broad-based. Inflation eased from September, thanks to much smaller vegetable price increases.
The Producer Price Index dropped 2.8 per cent year on year, but climbed 0.2 per cent from September on improved industrial demand.
Electricity production rose 6.4 per cent year on year to 389.8 billion kilowatt-hours last month, the strongest growth since April, according to the bureau.
Retail sales growth picked up from 14.2 per cent in September to 14.5 per cent last month, partly helped by vehicle sales which gained speed with the easing of discord with Japan over the islands in the East China Sea.
Growth of fixed asset investments grew from 20.5 per cent in the first nine months to 20.7 per cent in the first 10 months.
New investment projects, a forward-looking indicator on fixed investment, surged 26.7 per cent year on year, faster than the 25.7 per cent gain in September.
Zhu Haibin, an economist at JP Morgan Chase Bank said the recovery could be attributed to policy easing, especially in infrastructure investment, the housing market stabilisation in recent months and the resilient domestic consumption.
However, Shen Jianguang, an economist at Mizuho Securities said the pickup is entirely due to infrastructure investment.
Some economists are more optimistic.
Nomura expects the economy to expand 8 per cent in the fourth quarter, while Merrill Lynch says it will be 7.8 per cent.
The economy expanded 7.7 per cent from a year ago in the January to September period.
JP Morgan economists said "the firming of economic data implies that the downside risk is mitigated and the government does not need to push up the scale of policy easing".
China is scheduled to release trade figures today.
Chen Deming, the minister of commerce, said yesterday that it would be very difficult for China to realise the annual target of 10 per cent growth for imports and exports combined this year.
The mainland's October exports rose more than 11 per cent on a year ago and imports grew by 2.8 per cent over the same period, Chen said.
Additional reporting by Victoria Ruan and Reuters.