More signs of recovery in China

Chinese data over the weekend generally supported the picture of a moderate recovery in the industrial sector fuelled by higher credit growth and a slight improvement in exports. While encouraging, still look for more rate cuts from PBoC to ease the debt burden of Chinese companies.  

Industrial production increased from 5.6% y/y in October to 6.2% y/y in. November and the monthly increase also rose from 0.5% to 0.6%.  Other data were also tilted to the positive side. M2 money supply rose from 13.5% y/y to 13.7% and credit from domestic bank loans and corporate credit bonds still point to higher activity. Retail sales surprised to the upside as well, rising 11.2% y/y in November (consensus 11.1% y/y), up from 11.0% y/y in October.  

Fixed asset investment was unchanged at 10.2% year-to-date y/y in November (consensus 11.1%). However, investment growth is still the weakest in 15 years with particular weakness in real estate investment. This part should pick up next year, though, as higher housing turnover feeds into more construction once the inventory of houses have been depleted.