Towards Financial Freedom
China: Economy Rebounded in 4q12
- The Chinese economy rebounded in 4q12 as widely expected though the growth rate was lower than our projection. Real GDP grew by 7.9% yoy (our forecast: 8.3%; consensus range: 7.4% - 8.6%, median: 7.8%) after 7.4% yoy in the thirdquarter. For 2012 as a whole, GDP growth amounted to 7.8% in real term, exceeding the official target of 7.5% for thewhole year though slightly below our forecast of 7.9% (consensus median: 7.7%). On a qoq basis, real GDP rose 2.0% in4q (vs. +2.1% in 3q, +2.0% in 2q and +1.5% in 1q), suggesting that the current pickup in growth momentum is still relativelymodest.
- Growth was weaker in 2012 (vs. +9.3% in 2011) as exports slowed to 7.9% in the year (vs. 20.3% in 2011), urban fixed asset investment (FAI) 20.6% (vs. 24% in 2011), retail sales 14.3% (vs. 17.1% in 2011), and industrial production 10% (vs. 13.9% in 2011).
- Fourth quarter GDP growth, on the other hand, was helped by an improvement in both trade and domestic demand. Exports improved to 9.5% yoy (vs. 4.5% in 3q12), urban fixed asset investment (FAI) ytd 20.6% (vs. 20.5% in 3q12), while retail sales and industrial production (IP) rose by a higher monthly average pace of 14.9% yoy in 4q (vs. 13.5% in 3q12) and 10% (vs. 9.1% in 3q12), respectively. The key factors behind the upturn in domestic activity were likely the pro-growth policies, particularly the increased infrastructure investment and measures to boost consumption.
- In the final month of 2012, retail sales (+15.2% yoy) and IP (+10.3% yoy) picked up further as expected compared to Nov. By contrast, urban FAI ytd came in weaker than anticipated (our forecast: 21.3%, consensus median: 20.7%) and moderated slightly as manufacturing FAI ytd continued to ease to 22% yoy from 22.8% in Jan-Nov, and road transportation FAI ytd moderated from 7.4% yoy in Nov to 6.6% in Dec. Likewise, property development investment ytd slowed marginally from 16.7% yoy in Nov to 16.2% in Dec despite the recent pickup in home prices in major Chinese cities. Although railway FAI ytd improved from 0.9% yoy in Nov to 2.4% in Dec, the leading indicator of investment in new projects ytd dropped slightly from 28.8% in Nov to 28.6% in Dec.
- Overall, while today's data confirm market expectations of an economic rebound in China in 4q12, they came in slightly below our forecasts particularly the pace of fixed asset investment. Specifically, the recovery in investment seems shaky. In our view, the continued headwinds from weak external demand and the risks of higher inflation may prevent an overly aggressive boost to investment this year or any significant pickup in exports and housing activity. For now, our 2013 GDP growth forecast continues to stand at 7.7%, reflecting both the transition to higher-quality growth and the absence of further monetary loosening and strong acceleration in investment and housing activity (kindly refer to our Dec 18 note, "China: Growth Outlook and Economic Policies Ahead").
Source: Kenanga
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