China has reportedly recorded its fastest industrial expansion since February 2022 in November, which signals a complex recovery in the world's second-largest economy.
According to CNBC, industrial output surged 6.6% in November from a year earlier, and China reported on Friday that this outpaced expectations for 5.6% in a Reuters poll and surpassed the 4.6% rise in October.
China Data Is a 'Mixed Bag'
However, retail sales growth reportedly fell short of projections, highlighting the uneven economic revival. CNBC reported that retail sales jumped 10.1% in November from a year ago, but analysts expected a 12.5% spike after a low base in 2022. Retail sales reportedly rose 7.6% in October.
Economists approach this data cautiously, considering the low base effect caused by stringent zero-Covid measures in the last quarter of 2022, which had a detrimental economic impact. Bank of America's Greater China economist Miao Ouyang told CNBC that the "data is a mixed bag."
"If you look at the whole set of data, it still shows that domestic demand is still on the weak side...and [the government] still definitely needs to do more to stabilize the economy," Ouyang noted.
In the initial 11 months of the year, urban fixed asset investment demonstrated cumulative growth of 2.9%, slightly falling short of the anticipated 3% increase. China's urban unemployment rate held steady at 5% in November.
After the publication of these figures, Hong Kong shares, which have been underperforming in the Asia Pacific region throughout the year, witnessed a surge of more than 3%.
Despite this increase, the Hang Seng Index remains down by over 14% year-to-date, positioned for a third consecutive annual loss. On the other hand, the CSI 300 benchmark in Shanghai and Shenzhen exhibited more moderate gains, rising by 0.7% in mid-morning trade and narrowing year-to-date losses to approximately 12.8%.
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Budget Deficit of China
In related news, Reuters reported that Chinese officials reached a consensus during their annual economic meeting to implement a budget deficit equivalent to 3% of the gross domestic product in 2024. This decision underscores Beijing's dedication to upholding fiscal discipline.
Although this deficit figure is less than this year's adjusted target of 3.8%, insiders suggested that special sovereign bonds might be issued to cover extra expenses, offering flexibility for potential increased stimulus measures. The potential issuance of these bonds could amount to as much as 1 trillion yuan ($140.16 billion).
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