Asia Paciﬁc Economic Outlook—November 2012 2
There has been debate lately over whether or not the Chinese economy has turned the corner and is on the verge of faster growth.
There have been some positive signs lately, suggesting that the worst is over. For example, the government reported in early November that exports in October were up 11 percent from the previous year, which is a much better performance than many analysts expected. In addition, there was a 9.6 percent increase in industrial production reported for October. These facts led some analysts to expect better economic growth in the fourth quarter than in the third. In addition, the government reported that inﬂation hit a 33 month low of 1.7 percent, offering the prospect of more easing by the central bank as it needn’t worry as much about inﬂation. Also, the government reported that retail sales grew slightly faster in October than in September, suggesting that the consumer side of the economy is on the mend.Another important set of indicators pointing to improvement were the recent purchasing managers’ indices. Speciﬁcally, China has two purchasing manager’s indices (PMIs) for both manufacturing and services. One is published by the government and the other by HSBC/ Markit. The government indices are more heavily weighted toward state-owned companies. For manufacturing, both indices improved in October. The private sector index increased from 47.9 in September to 49.5 in October. The government index increased from 49.8 in September to 50.2 in October. A reading below 50.0 indicates a decline in activity. Consequently, the private sector index suggests continued decline but at a much slower pace, and the government index suggests renewed but modest growth.As for the PMI for services, the one issued by the government suggested an acceleration in services output. The index increased from 53.7 in September to 55.5 in October. The other index, released by HSBC/ Markit, showed a deceleration from 54.3 in September to 53.5 in October. The government index is weighted more heavily toward state-run companies, which have lately been the recipient of stimulus funding from the government. Both indices suggest that services output is rising at a reasonably good pace. Still, the economy continues to exhibit problems stemming from external phenomena. Consider the Canton Fair, which takes place twice a year in Guangzhou. It is a major venue for the promotion and sale of Chinese apparel and electronics products. Activity at the Fair is a good indicator of global demand for Chinese goods. In early November, it was reported that sales at the Fair were down about 10 percent from the event held earlier in 2012. Moreover,