On November 14, the Chinese National Bureau of Statistics released its economic data for October. The analysis of multiple economic data sources came out with the same revelation that the current economic trend in China is far from being optimistic.
To be more specific, economic data for the month of October demonstrated following characteristics:
Domestic industrial growth in China continues to slow down. In October, the national scale sized industrial enterprises experienced a 4.7% increase in added value growth, where the growth rate dropped by 1.1 percentage points compared with last month. From January to October, the industry had experienced growing up to 5.6%, a rate that was similar to that of the months from January to September. It is particularly noticeable that the automobile industry took the hardest hit, where the production had experienced overall negative growth by 2.1%. The negative growth from January to October was 11.1%. The negative growth rate in sedans for October is 8.7% while previous 10 months the negative growth was 14.8%. The negative growth of new energy cars in October was 39.7%, which increased by 11.5% compared with the first 10 months. Besides that, the sales rate of industrial enterprises in October was 97.7%, 0.5 percentage points lower over same period compared with last year. The industry export value reached RMB 1,089.9 billion yuan, down 3.8% from the previous year.
Investment growth continued to recede. From January to October, China's fixed-asset investment (excluding farmers) was RMB 510.88 billion, an increase of 5.2% compares with last year, and the growth rate was lower by 0.2 percentage points compares with January to September. Among them, private fixed assets investment was RMB 2,915.2 billion, an increase of 4.4% of year-on-year, and the growth rate was 0.3 percentage points lesser than that in January-September. The growth rate of state-owned investment was 7.4%, which became a pivotal pillar to support the investment. It is worth to note that the proportion of private investment in total investment had fallen below 60% to 57.06%. This is an indication that private investment had shrunk significantly. The national real estate development investment was RMB 1,090.6 billion, a year-on-year rise of 10.3%, and the growth rate dropped by 0.2 percentage points from January to September.
Consumption growth continued to wither. In October, the total retail sales of consumer goods reached RMB 3.8104 trillion, a nominal elevate of 7.2% year-on-year (excluding the actual increase of 4.9% in price factors), and the growth rate reduced 0.6 percentage points from the previous month. From January to October, the total retail sales of consumer goods reached RMB 334.78 billion, an increase of 8.1%, and the growth rate deteriorates by 0.1 percentage points from January to September. In addition, the total retail sales of social consumer goods other than automobiles escalated by 8.3%. From January to October, the national online retail sales amounted up to RMB 8.2307 billion, a year-on-yearr increase of 16.4%, and the growth rate deduced by 0.4 percentage points from January to September.
Consumer prices have risen structurally, but production price growth remained negative. In October, the national consumer price index (CPI) rose by 3.8% year-on-year, a slight increase of 0.8 percentage points and 0.9% increase from the previous month. In terms of categories, food and tobacco prices rose by 11.4% year-on-year; education, culture, and entertainment up by 1.9%, health care increased by 2.1%. Pork rose dramatically by 101.3% among the food, tobacco and alcohol category. After deducting food and energy prices, the core CPI rose by 1.5%, the same as last month. From January to October, the CPI rose by 2.6% year-on-year. In October, the national industrial producer price index (PPI) fell by 1.6% year-on-year, where it remained in negative growth space.
The total volume of imports and exports had declined as well. In October, the total volume of imports and exports was RMB 270.71 billion, down 0.5% year-on-year, and the decline was 2.7 percentage points lower than previous month. Among these, exports were RMB 150.42 billion, up 2.1% year-on-year, but fell 0.7% last month; imports were RMB 1202.9 billion, down 3.5%, and the deduction was narrowed by 2.5 percentage points from the previous month. The trade surplus was RMB 301.3 billion; from January to October, the total volume of imports and exports was RMB 2562.73 billion, an increase of 2.4%. Among them, exports were RMB 139.84 billion, an increase of 4.9% while imports were RMB 116.432 billion, down 0.4%.
The economic data for October showed that the overall economic situation in China is declining and worsening. It is particularly noteworthy that the growth rate of domestic consumption also experiencing a gradual fall, and this is a sign that the power of the "Chinese market" is diminishing. These trends indicate that both investments and foreign trade are encountering problems. If China's domestic demand also encounter issues, the driving force for the country's economic growth will continue to be weakened.
According to Wang Tao, Chief China Economist of United Bank of Switzerland (UBS), if the U.S.-China trade fictions are not alleviated, the central government of China might accept an economic growth rate that is below 6%, in order to avoid introducing radical loan credit and real estate policies, which will further affect the stability of the financial system within the medium period of time. UBS estimated that China's fiscal policy will expand moderately in 2020 and the basic investment will rebound from 6% to 8%. Judging from the latest economic data of October, UBS's prediction is relatively optimistic. If the current trend continues, it may force China to introduce more flexible and stimulus policies.
Final analysis conclusion:
The economic circumstance in October suggested that the economic growth will continue to fall in the fourth quarter this year and likely to plunge below 6%. This will likely affect the economic trend of China next year.
