China’s Economy Shows Signs of Stabilizing but Pressures Persist

27 Apr,2016

China will release official numbers on its first-quarter economic growth next week, but early assessments point to positives for the powerhouse in the startofthe year. Forecasts from 14 Wall Street Journal economists pegged China’s first quarter growth at 6.7%,slower than the previous quarter’s 6.8%. Andthoughthe country could still be well out from any kind of real rebound China’s premier Li Keqiang said Monday there have been more positive factors in economic operations.

Li keqiang said the government will emphasize supply-side reforms while still keeping economic growth stable, according to local Media reports, Value added industrial output is expected to show growth around 6 percent for March, up from 5.4% growth in January-February, the WSJ survey showed, which falls in line with the general pick-up in activity after the Chinese New Year holiday.

Exports are projected at an 8.5% increase in March after eight months in a row of decline, and imports are expected to be down 10.4%, a slower decline than February’s 13.8%.

Costs have been steadily on the rise in China in recent years, and economists have said there might be little room for further Monetary policy easing, When it comes to labor, rising costs have been a major factor for the apparel and textile sectors, and Some labor-intensive factories are shopping around for new homes where production costs would be lower and they could Reclaim a competitive edge.

China’s National Bureau of Statistics said Monday that the Producer Price Index (PPI) for manufactured goods-which Measures the average change in selling prices domestic producers get for their output-increased0.5% month-on-month but fell 4.3%, year-on year. The overall average PPI from January to March decrease 4.8%, and for manufactured goods it was down 5.8%.Producer pricing for clothing, however, inched up 0.8%.

Consumer prices-the main gauge of inflation-went up 2.3% in cities and 2.2% in rural areas, with clothing prices up 1.5%.

Given the upcoming stabilization of real economic activity, ongoing rebound in property sales and prices, and the recent Jump in headline CPI, we think policy easing momentum has likely peaked in the near term, UBS economists told the Journal.


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