Saturday, December 12, 2015

Economy: China`s Recovery

(Drivebycuriosity) - If we be believe the media then China is about to crash. But the facts show that the country is recovering from the recent soft patch.

This morning we learned that the Chinese retail sales grew 11.2 % in November after 11.0% in October (bloomberg reuters). This is the fourth acceleration back-to-back and the best retail number for this year. Since April the retail sales have been trending stronger as you can see in the chart below (source: tradingeconomics).

China´s consumers are benefitting from swiftly climbing wages (tradingeconomics). They also are profiting from the massive economic stimulus measures (reduced interest rates, stock purchases with government money, more infrastructure investments and more). China´s consumers also get a lot support from cheaper oil and other commodities which leaves them more money to spend for other goods (like electronics).

The pick-up in consumption shows that China´s economy is right on track. The country is transforming from an industrial & export-focused economy to a modern system like the US, where most of the GNP is fueled by consumer spending. In the US consumer spending is the engine of the economy. China, which still depends too much on exports & industrial production, is on the way to became a modern economy.

But China’s old growth drivers are also getting stronger. The encouraging retail sales numbers where accompanied by better manufacturing data. This morning we also heard that factory output climbed 6.2 % in November from a year earlier, faster than in October (plus 5.6%) (chart below source: tradingeconomics )

I think that China´s retail & industrial growth will gain more speed in the coming months thanks to the ongoing stimulus measures and the strong tailwinds from cheaper oil and other commodities.  China´s economic recovery should boost the global economy in 2016.

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