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China data show buoyant industrial sector, but retail and real estate sluggish
by Robert St George on Sep 10, 2013 at 12:48
The latest economic figures from China have indicated the country’s industrial base is in rude health, but the retail and real estate sectors have disappointed.
Industrial production in August exceeded all expectations, growing from 9.7% year on year in July to 10.4%. This was the strongest performance since March 2012, and beat even the most bullish prediction of 10.2% in a Bloomberg poll. The consensus forecast had been 9.9%.
The greatest acceleration in growth came courtesy of state-owned factories, which picked up from 8.1% year on year in July to 9.5% in August. Steel production, for instance, surged from 10.9% between the two months to 15.6%.
In contrast, new property starts measured by area fell by 20% in August compared with the equivalent month in 2012. Retail sales growth was also relatively weak at 13.4%, up slightly from 13.2% in July but still below the rate of 14.3% for 2012 as a whole.
The official release confirmed too that bank lending is now growing at its slowest pace since 2006, although the total amount of debt in the country has increased marginally thanks to a proliferation of non-bank loans. Credit overall expanded by 20% compared with August 2012.
‘Bringing this together, the stronger data over the last couple of months have settled nerves about a possible hard landing, but there are strong echoes of the turnaround in 2009,’ commented Mark Williams, chief Asia economist at Capital Economics. ‘The economy is once again being propelled, unsustainably, by state-led investment.’
Among the large China funds, Allianz China Equity has the greatest weighting to industrial and basic materials, accounting for a combined 34% of its portfolio. Invesco PRC Equity is more exposed to Chinese consumers, with the segment representing 23% of the fund, as well as a 40% allocation to financials.
Templeton China has the most balanced split between the two, with 32% in consumer names and 27% in basic materials.
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