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China's factory output beats forecasts as Asia shakes off COVID-19 slump

China's factory output beats forecasts as Asia shakes off COVID-19 slump

A worker works at Xunxi factory, which is an affiliate of Chinese e-commerce giant Alibaba, during a media tour, in Hangzhou, Zhejiang province, China, on Nov 10, 2020. (Photo: REUTERS/Aly Song)

BEIJING: China's factory output rose faster-than-expected in October and retail sales continued to recover albeit at a slower-than-forecast pace, as the world's second-largest economy emerged from its COVID-19 slump.

Industrial output climbed 6.9 per cent in October from a year earlier, data from the National Statistics Bureau showed on Monday, in line with September's gain. Analysts polled by Reuters had expected a 6.5 per cent rise.

The upbeat figures came as other Asian economic powerhouses also climbed out from their pandemic depths with Japan's economy reporting its fastest quarterly growth on record.

China's industrial sector has staged an impressive turnaround from the pandemic paralysis seen earlier this year, helped by resilient exports.

Now, with the coronavirus largely under control in China, consumers are opening up their wallets again in a further boost to activity.

"The latest data suggest that the broad-based acceleration of China's economy continued in October," Julian Evans-Pritchard at Capital Economics said in a note.

"Policy stimulus continued to boost investment and industrial output while growth in real retail sales and services activity returned to pre-virus levels."

READ: China's new home price growth cools for 2nd straight month

Across China, smelters and refineries ramped up production in October with aluminium and crude oil hitting record output levels as the reopened economy stoked demand.

China's fourth-quarter economic growth will accelerate from the third quarter, Fu Linghui, spokesman of the National Statistics Bureau said, told reporters at a briefing.

Consumption prospects are improving, with the services industry showing good recovery momentum, Fu said.

Retail sales rose 4.3 per cent on-year, missing analysts' forecasts for 4.9 per cent growth but faster than the 3.3 per cent increase in September.

China's auto industry reported robust 12.5 per cent growth in October vehicle sales thanks to surging demand for electric cars and trucks.

Domestic tourism also saw a strong rebound over the Golden Week holiday last month, although levels were still well short of last year's.

Fixed-asset investment rose 1.8 per cent in January-October from the same period last year, compared with the 1.6 per cent growth forecast and a 0.8 per cent increase in the first nine months of the year.

READ: Asian stocks hit record peak as vaccine hopes dampen virus fears

NOT READY TO TIGHTEN POLICY

China's consistent run of improving data since the second quarter and recent comments from officials have prompted speculation the central bank may start to tighten policy.

But analysts say policymakers are unlikely to rush winding down existing stimulus amid persistent uncertainties about the pandemic and global demand.

"Domestic demand remains relatively weak, and any move to tighten policy could hurt the economic recovery," said Nie Wen, economist at Shanghai-based Hwabao Trust.

The government has rolled out a raft of measures including more fiscal spending, tax relief and cuts in lending rates and banks' reserve requirements to revive the economy.

Property investment was a key driver of broader spending with October real estate investment up 12.7 per cent from a year ago, the fastest pace since July 2018 and quickening from 12 per cent seen in September, according to Reuters calculations based on NBS data.

Property sales by floor area rose a solid 15.3 per cent, the highest in over three years, while new construction starts expanded 3.5 per cent, improving from last month's fall of 1.9 per cent.

However, government efforts to prevent bubbles in the property sector are gaining traction with Chinese new home prices growing at a slower monthly pace in October amid restrictions imposed in some big cities.

Private sector fixed-asset investment, which accounts for 60 per cent of total investment, fell 0.7 per cent in January-October, compared with a 1.5 per cent decline in the first nine months of the year.

While China's economic recovery looks to be accelerating, surging coronavirus infections in Europe and the United States have clouded the outlook for exports.

READ: China unlikely to find US President-elect Biden a soft touch

Former Chinese finance minister Lou Jiwei said last week trade frictions between the United States and China may not ease in the near-term, even under a Joe Biden presidency.

Analysts believe a Biden administration is likely to maintain a tough political stance on Beijing, keep tight restrictions on China's access to advanced technology, although it could act in a less aggressive and more predictable way than the Trump administration.

China's economy grew 4.9 per cent in the third-quarter from a year earlier, but annual growth could slow to just over 2 per cent for 2020. That would be the weakest in over three decades but still much stronger than other major economies.

Source: Reuters/jt

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