China: Signs of stabilization in Q4 – UOB

Economist at UOB Group Ho Woei Chen, CFA, comments on the latest PMIs releases in the Chinese economy.

Key Takeaways

“China’s official manufacturing and non-manufacturing Purchasing Manager’s Indexes (PMIs) were both above expectations in November. This corroborates October macroeconomic data that showed signs of stabilisation after a weaker than expected 3Q.”

“Inflationary pressures also appeared to have eased in November. The input and selling prices for both the manufacturing and non-manufacturing have moderated.”

“We are cognizant of the downside risks that continue to plague the Chinese economy including the softening real estate market, renewed virus outbreak (especially with recently discovered “Omicron” variant), global energy shortages and supply disruption. With property accounting for as much as 70% of household assets in China, the weaker outlook for the property market will also have substantial negative wealth effect that feeds into the demand recovery.”

“We remain of the view that China’s 4Q21 GDP growth could slow further to 3.5% y/y from 4.9% in 3Q21. For the full year, we expect GDP growth at 7.9% in 2021, and then normalise to around 5.7% in 2022.”