Downside risks to China's growth remain despite of temporary stabilisation

China's November domestic activity was better than expected. The IP growth was 6.2%yoy, which also came above expectations. This solid rebound was led by auto and steel production following a tax cut of small car purchases in September.

Strong infrastructure growth is seen, fixed asset investment growth remained, balancing the deterioration in real estate investment growth at 2.0% y/y.

Consumption growth remains robust, meanwhile, nominal retail sales climbed, while retail sales were steady and Online retail sales continued their solid growth.

"However, we believe the faster growth in IP is transitory as the headwinds from industry overcapacity remain and the impact from the small car tax cut will phase out gradually. We expect investment growth to moderate in December, likely led by real estate investment", says Barclays in a research note. 

Developers focused on inventory rundowns and earnings growth, rather than construction, despite strong property sales. The double digit contraction in new floor continued and lowered PPI deflation persists to discourage manufacturers inventory destocking.

"We expect weak growth of 5.7% y/y SAAR in Q4 2015 (Figure 2-3). Our model-based GDP tracker using a group of high frequency indicators (PMIs, trade, electricity output, steel usage, auto sales, and retail sales etc) suggest Q4 growth could be 20-40bp lower than growth in H1 (7.0%)", estimates Barclays.