As more economists join the bull camp in predicting a continued economic recovery on the mainland, a few are seeing amber lights flashing ahead.
Given the tricky global economic situation, and as demand at a number of industries has failed to pick up, they argue it is difficult to interpret the country's outlook despite a recent flurry of encouraging data. Indicators from manufacturing to exports issued in the past month prompted many China watchers to conclude a firm rebound is under way, with some even expecting an upside surprise.
Exports rose 11.6 per cent in October from a year earlier, faster than September's 9.9 per cent rise, and beating market expectations. HSBC's flash purchasing manufacturing index rebounded to a 13-month high, and industrial output rose to 9.6 per cent from 9.2 per cent a month earlier. Industrial profits jumped 20.5 per cent from a year ago, far outpacing September's 7.8 per cent gain.
As the mainland's economic growth has weakened since early 2009, the government took steps to prop it, including cutting interest rates in June for the first time since 2008, lowering the required reserve ratio at banks to free up cash for lending and fast-tracking certain infrastructure projects such as high-speed railways.
Chen Dongqi, a vice-director at the Academy of Macroeconomic Research under the National Development Reform and Commission, said economic growth might speed up to 7.8 per cent in the fourth quarter from 7.4 per cent in the third and 7.6 per cent in the second, largely driven by infrastructure investment in the past few months.
But officials from some industries appear less optimistic, and judging by the weak performance of the stock market, investors, too, are sceptical.
"Demand has shown signs of stabilising, but I don't think a bottom has formed," Hu Wenming, the chairman of China State Shipbuilding, said at the recent Communist Party congress. "Orders won't recover in the near term."
Hu also said the industry was unlikely to see significant growth over the next three years because of a prolonged fallout from the global economic troubles plaguing Europe and the United States.
"While October data appears to indicate a recovery, the outlook remains unclear, uncertain," said Yuan Gangming, a researcher at the Chinese Academy of Social Sciences, a think tank.
Major industries such as chemical engineering and refining also had cautioned that the worst was not yet over, with prices actually falling more sharply than before, Yuan said, citing comments he heard at recent industry outlook meetings.
An official at China Iron & Steel Association, who declined to be named, said recent rises in steel prices, driven by accelerated investment in areas such as high-speed railways, probably boosted steelmakers' performance in October. But he said "it remains difficult for the industry to achieve a profit for the full year".
About 25 per cent of the companies tracked by the association remained in the red, he added.
Mizuho Securities' economists said politics might have played a role in the recent batch of rosy data. In a recent report, they noted the "unified" optimism expressed by state media as well as senior government officials during the party congress. "It is difficult to ignore the potential impact on recent economic data from the political forces," the economists wrote.
They identified areas for concern, including rising accounts receivable, namely liabilities owed by companies to each other, that could potentially set up a chain reaction of defaults. Also, while investment in railway and highway construction surged in October, investment in other sectors, such as manufacturing and real estate remained lukewarm.
Data published by the National Bureau of Statistics this week showed companies' accounts receivable climbed 15 per cent at the end of October to 8.3 trillion yuan (HK$10.3 trillion).
"We are … wary about the 'window-dressing' type of stimulus during the party congress," Mizuho said.
While it remains difficult to test the reliability of government data, many market watchers believe there is reason to add a pinch of salt to the numbers.
Among signs that some economists say point to further weakness ahead for the economy is a 10 per cent decline in the value of contracts signed at the Canton Fair held in October.
Others, including Yuan, have their eye on the stock market. This week, the Shanghai Composite Index closed below the key 2,000-point level for the first time since 2009. It is down 9.97 per cent this year.
"People invest their money in it. The market is the real barometer for the economy," Yuan said.