Economic recovery calls for efforts from supply and demand sides

The pressure on economic downtrend is finally eased somewhat by the key macroeconomic data of November released by the National Bureau of Statistics (NBS). Industrial production growth rebounded unexpectedly, consumption growth continued to pick up, and the investment in manufacturing industry and infrastructure construction surged slightly in November.

Though the economy stabilizes temporarily, the accumulated declining tendency is hard to be reversed. Especially that the investment in real estate has not bottomed out yet. Analysts believe that easing policies are still needed by both supply and demand sides to boost growth.

The data announced by the NBS on Dec. 12 shows that the value-added industrial output, an important economic indicator, grew 6.2 percent year on year in November, picking up from the 5.6 percent growth recorded in October. NBS statistician Jiang Yuan analyzed that the picking up of industrial growth is mainly contributed by sharp growth of automobile manufacturing industry. Boosted by preferential policies on purchase tax and the recovery of production after enterprises’ destocking, the value-added output of automobile manufacturing industry saw a year-on-year growth of 13 percent in November, picking up 5.7 percentage points compared with that in October.

The automobile retail sales also boosted the consumption growth to 11.2 percent in November, continuing the surge for four months straightly.

Besides, the investment growth finally shows indication of stabilizing after dropping for 14 straight months. The investment during Jan.-Nov. period sees a total growth of 10.2 percent, holding the line with previous figure. As to main investment forces, both the manufacturing industry and infrastructure construction see slight growth, showing that earlier policies to stabilize growth are taking effect.

“Policies are gradually taking effect and the economy might rise steadily”. Sheng Laiyun, spokesman for the National Bureau of Statistics, indicated during a media interview ahead of the release of macroeconomic data in November that “though only less than a month is left, I believe the annual growth target of “around 7 percent” will be achieved.”

However, many analysts believe that though the economy stabilizes temporarily, it is still doubted whether the trend can be maintained or not.

This doubt might come from the continuously declining investment in the real estate. Data shows that the investment growth in real estate continued the drop to 1.3 percent during Jan.-Nov. period. In addition, the newly-started construction declined 14.7 percent, representing an expanded drop.

The analysis made by the fixed-income research team of China International Capital Corporation Limited (CICC) stated that “the sales of commercial houses are highly possible to slow down obviously next year. The area of newly-constructed housing is expected to continue the declining trend next year, but will still be higher than the sales area of commercial houses, meaning that the generalized stocking of real estate will further climb and the destocking will remains to be a core problem faced by the real estate market.”

Zhu Baoliang, chief economist with the State Information Center, also believes that the economy now sees no sign of recovery. China’s economy might rebound after the domestic economic adjustment by end-2017. Under such circumstances, easing policies are still needed by both supply and demand sides boost growth.

As to the supply side, Yan Yuejin, director of research at E-House China in Shanghai, told the journalist of SSN that the measures for the destocking of real estate market, especially those aiming at the destocking of third-tier and fourth-tier cities, might be rolled out soon.

As to the demand side, Li Huiyong, chief analyst with Shenwan Hongyuan Securities, believes that there is still room for easing monetary policies. The People’s Bank of China might cut the benchmark interest rates by 50 base points and lower the reserve requirement ratio (RRR) by six times in next 12 months.