China’s August economic indicators surprise on the upside

China's industrial production rose by 4.5% year-on-year (y/y) in August beating the consensus forecast of 3.9% and accelerating from a 3.7% y/y increase in July.

People walk past behind a miniature model of the Jiyanghu Ecological Park at a showroom in Zhangjiagang, Jiangsu province, China, August 5, 2015. Picture taken August 5, 2015. To match INSIGHT CHINA-ECONOMY/DEBT REUTERS/Aly Song

Published Sep 24, 2023

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By Helmo Preuss: Economist at Forecaster Ecosa

China's economic indicators were stronger than expected in August, indicating that the country's recent pro-growth policies were proving to be effective and pessimists are likely to be disappointed once again.

China's industrial production rose by 4.5% year-on-year (y/y) in August beating the consensus forecast of 3.9% and accelerating from a 3.7% y/y increase in July. This was the strongest expansion in industrial production since April as manufacturing output grew by 5.4% after a 3.9% rise in July.

China's retail sales grew by 4.6% y/y also beating the consensus forecast of 3.0% and accelerating from a 2.5% y/y increase in July. This was the largest increase in the retail sales since May, boosted by increases in sales of clothes of 4.5% after a 2.3% rise in July, while furniture rose 4.8% from 0.1%, communications equipment jumped by 8.5% after 3.0%, cosmetics grew by 9.7% after a 4.1% decline and gold, silver and jewellery surged by 7.2% after a 10.0% drop.

China's banks extended 1.36 trillion in new yuan loans in August 2023 easily beating the consensus forecast of 1.2 trillion yuan after a small 0.35 trillion yuan rise in July. Household loans, including mortgages, rose to 392.2 billion yuan after a 200.7 billion yuan contraction in July. Corporate loans surged to 948.8 billion yuan from 237.8 billion yuan.

The troubled property sector also showed improved data for August with the square meters of new housing starts rising by 12.2% month-on-month (m/m) and the value of new housing sales increasing by 10.7% m/m.

As the major economic indicators are improving the Chinese government has ridden the positive momentum and introduced a string of macro policies across the board. On the fiscal front, the government has increased its issuance and use of special-purpose local government bonds. On the monetary front, the central bank has made policy rate adjustments and cut the commercial banks’ reserve requirement ratio twice this year.

The government recently relaxed the criteria identifying first-home buyers to allow more people to benefit from preferential policies, and lowered the interest rates of existing first-home mortgages.

The chargé d'affaires Li Zhigang at the Chinese embassy in Pretoria said that China is pursuing high-quality development that is innovative, coordinated, green, open and shared by all.

Innovative development stimulates vitality. Last year, China's total investment in research and development exceeded R7.7 trillion, which was an increase of 10.1% over 2021. In the first half of 2023, investment in high-tech industries grew by 12.5% y/y, while the added value of the manufacturing industry for aircraft, spacecraft, equipment and lithium battery surged by more than 20% y/y.

“Green development serves to address humanity’s common challenges. In July alone, China witnessed its amount of new energy vehicles, installed wind power capacity and charging stations rise by a quarter. China's installed renewable energy capacity has already surpassed that of coal, of which the installed capacity of wind power has ranked first in the world for 13 years in a row and solar PV power 8 years in a row,” Li said.

He noted that while global development faced mounting challenges, BRICS expansion was the biggest highlight of this year's BRICS Summit and a historic moment in the development of the BRICS mechanism. In that respect, China was ready to work with fellow BRICS partners to act on the BRICS spirit of openness, inclusiveness and win-win cooperation, build consensus on important issues, carry forward the tradition of independence, and resolutely uphold international equity and justice.

“We will urge the international community to refocus on development issues, promote a greater role by the BRICS mechanism in global governance, and make the voice of BRICS stronger,” Li added.

China firmly supports the African Union (AU) accession to the G20, and warmly congratulates the AU on becoming a full member of the G20 at the recent New Delhi Summit. Next year, China will host the 9th Forum on China-Africa Cooperation (FOCAC) meeting, and it will be another opportunity to plan together, for the future development of China and Africa.

South Africa was the first African country to sign the Belt and Road cooperation document with China. It has been China's biggest trading partner in Africa for 13 years in a row, as well as one of the African countries with the largest stock of Chinese investment.