Economic indicators for China reveal robust activity

FEARS OF a property bubble and slower exports abide, but leading economic indicators on China, a vital engine of global growth, show that prospects are ticking up in the world’s second biggest economy.

China is trying to juggle efforts to combat rising inflation with the need to keep economic growth steady and ensure a “soft landing”.

The People’s Bank of China said this week that growth was slowing as a result of the macroeconomic policies but insisted the economy’s momentum remained “strong”. The private-sector industry group the Conference Board published its Leading Economic Index for China yesterday, showing a rise of 0.4 per cent in September to 160.2, following a 0.6 per cent increase in both August and July.

The index gauges prospects for the next six months.

“Economic activity in China remains robust, but that pace of growth should continue to ease in the near term,” Andrew Polk, the Conference Board’s Beijing-based economist said in a statement.

Economic growth slowed to 9.1 per cent in the last quarter.

Foreign direct investment (FDI) also appears to be slowing, but it is proving remarkably robust. Between January and October, China’s FDI surged by 15.86 per cent to $95 billion (€70.5 billion), almost equal to the total amount in 2010. FDI increased by 8.75 per cent year-on-year in October to $8.33 billion (€6.18 billion), official data showed. In September FDI rose 7.9 per cent.

Between January and October, investment from the 27 EU nations, China’s biggest trading partner, increased by 1.05 per cent to $5.51 billion (€4.1 billion).

Direct investment from the US fell, partly because of the economic slowdown there and partly as a result of the reshoring of manufacturing activity and the rising cost of labour in China, according to the data.

Some US companies have brought their manufacturing operations back as the government there tries to boost domestic industrial activity, while other companies have moved their manufacturing to other Asian countries. Athletics equipment maker Nike said recently that it now made more sport shoes in Vietnam than in China.

However, ministry of commerce spokesman Shen Danyang said the decline in EU and US investment expansion was not expected to become a general trend.

“Despite veiled words [from some foreign firms] about China’s investment environment, the country is still the world’s most attractive investment destination. Companies from different parts of the world are investing, and will actively add investment here,” Mr Shen told local media.