China Releases Strong Economic Figures

Alan Penny

17 January 2020

3 min read

China stock market

  • Chinese GDP stable
  • Fixed Asset Investment better than anticipated
  • Industrial Reduction beats expectations
  • Retail Sales strong
  • Unemployment Rate released

Early Friday morning in Asia, the Chinese released a slew of economic figures to give the rest of the world an idea as to how the economy is running.

These were far-reaching, and in general were very strong. In fact, most of the figures beat expectations, which could lead to more of a “risk-on” type of marketplace.

The announcements

The Chinese GDP figure came out at 6.0% for the quarter, year-on-year. This is exactly as expected, and exactly as printed last time. Because of this, the world has the same Chinese economy to deal with as they did previously.

there are a lot of people in the market complaining about the numbers not necessarily being trustworthy

That being said, there are a lot of people in the market complaining about the numbers not necessarily being trustworthy.

Fixed Asset Investment came in at 5.4%, which was better than the expected 5.2% for the announcement. Even more importantly, Industrial Production year-over-year came in at 6.9%, this being much stronger than the anticipated 5.9%.

After that, Retail Sales year-over-year came in at 8.0%, which was better than the anticipated 7.9% by the market. Finally, the Unemployment Rate came out at 5.2% at the same time.

Take the numbers in stride

Going forward, it’s very likely that the markets will take these numbers in stride, because more importantly than all of the announcements is the fact that the US-China trade deal was signed. It can give the markets some type of hope for economic growth moving forward.

The trade tariffs haven’t knocked back the Chinese economy that much, at least according to the numbers. With that being the case, the market is very likely to see more “risk-on” behavior as long as the Chinese can keep production up.

The Chinese consumer is becoming increasingly important, so pay attention to the retail sales figures going forward. The GDP numbers, of course, continue to come in with a 6 handle, but one has to wonder whether or not it is manufactured because there is such psychological importance put on that level. A lot of pundits are talking about the possibility of a “5 handle GDP”, and of how it looks poor.

Bear in mind that the Chinese Communist Party has a bit of a social contract with the local populace, keeping them in power. The idea of extreme growth has become the norm over the last several decades, but as China grows and matures in an economy, it’s difficult to expect these explosive numbers all of the time.

That being said, these are the numbers that traders have to work with when placing investments. Ultimately, the market will look at this as a good sign and start placing money in risk-appetite type of situations, such as stock markets, energy, and of course Chinese equities.

The Chinese economy seems to be pulling through the tariffs, at least on the surface, from the economic numbers available.

Written By
Alan Penny

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