Asia Pacifc Economic Outlook—November 2012 2
There has been debate lately over whether or notthe Chinese economy has turned the corner and ison the verge o aster growth.
There have been somepositive signs lately, suggesting that the worst is over. Forexample, the government reported in early November thatexports in October were up 11 percent rom the previousyear, which is a much better perormance than manyanalysts expected. In addition, there was a 9.6 percentincrease in industrial production reported or October.These acts led some analysts to expect better economicgrowth in the ourth quarter than in the third. In addition,the government reported that infation hit a 33 month lowo 1.7 percent, oering the prospect o more easing by thecentral bank as it needn’t worry as much about infation.Also, the government reported that retail sales grewslightly aster in October than in September, suggestingthat the consumer side o the economy is on the mend.Another important set o indicators pointing toimprovement were the recent purchasing managers’indices. Specically, China has two purchasing manager’sindices (PMIs) or both manuacturing and services. Oneis published by the government and the other by HSBC/ Markit. The government indices are more heavily weightedtoward state-owned companies. For manuacturing, bothindices improved in October. The private sector indexincreased rom 47.9 in September to 49.5 in October. Thegovernment index increased rom 49.8 in September to50.2 in October. A reading below 50.0 indicates a declinein activity. Consequently, the private sector index suggestscontinued decline but at a much slower pace, and thegovernment index suggests renewed but modest growth.As or the PMI or services, the one issued by thegovernment suggested an acceleration in servicesoutput. The index increased rom 53.7 in Septemberto 55.5 in October. The other index, released by HSBC/ Markit, showed a deceleration rom 54.3 in Septemberto 53.5 in October. The government index is weightedmore heavily toward state-run companies, whichhave lately been the recipient o stimulus undingrom the government. Both indices suggest thatservices output is rising at a reasonably good pace.Still, the economy continues to exhibit problems stemmingrom external phenomena. Consider the Canton Fair,which takes place twice a year in Guangzhou. It is a majorvenue or the promotion and sale o Chinese apparel andelectronics products. Activity at the Fair is a good indicatoro global demand or Chinese goods. In early November,it was reported that sales at the Fair were down about 10percent rom the event held earlier in 2012. Moreover,