Is China doing a bit of advance softening up of markets ahead of the October data release tomorrow?
There were suggestions in a couple of reports in official media yesterday that the trade surplus rose in October, while inflation had a sharp fall to well below 6% (annual rate).
At the same time, US investment bank, Goldman Sachs, has changed its outlook on China and is now bullish, again (See below).
According to a report yesterday in a paper called First Financial Daily China’s trade surplus will rebound to $US23.89 billion in October after falling for two consecutive months.
Xinhua, the government-owned website reported the story from First Financial Daily, which did a survey of economists to arrive at the figure.
According to the reports, most economists said they expect the country’s October trade surplus to be higher than the $US14.5 billion recorded in September.
"Exports are likely to increase by 16.1%, slower than the 17.1% growth posted in September, while imports are expected to rise by 21.7%, up from September’s 20.9% rise."
China’s export growth will continue to slow over the next few months due to weak global demand; the newspaper quoted Qu Hongbin, HSBC’s chief China economist, as saying.
But Qu said the country’s exports will not witness negative growth, as the current economic turmoil is less severe than the financial crisis in 2009.
Li Daokui, an advisor and member of the monetary policy committee of the People’s Bank of China, said last month that he expects the country’s full-year trade surplus to reach $US150-$US160 billion.
Li also predicted that the trade surplus will further narrow next year, according to another report on Xinhua.
China’s trade surplus shrank by 10.6% to $US107.1 billion in the first nine months of 2011.
And, another story given prominence on Xinhua yesterday said that China’s consumer price index will ease for a third consecutive month in October.
"China’s CPI is likely to fall to 5.5 percent in October, due to falling food prices, said Yuan Gangming, a researcher at the Institute of Economic Research under the Chinese Academy of Social Sciences," the agency reported.
"According to data from the Ministry of Commerce, the wholesale prices of 18 staple vegetables fell 2.2% during the last week of October, while prices of pork and eggs dropped by 1% and 0.6%, respectively.
"In addition to lower food prices, declines in world commodity prices and weakening tail-raising factors will also contribute to the CPI’s decline, said Lian Ping, chief economist for the Bank of Communications.
"Lian said he expects the country’s CPI to stand at 4 percent in December, with the full-year CPI reaching 5.5 percent."
"China’s CPI has reached a turning point and will be kept below 5 percent during the last two months of the year, said Peng Sen, deputy director of the National Development and Reform Commission.
The National Bureau of Statistics will release the October CPI tomorrow.
According to media reports yesterday, Goldman Sachs has advised buying Chinese stocks as the nation’s economy will grow "close to trend" in the coming quarters, spurred by easing credit and government measures to help small companies.
"We are recommending a long position in Chinese equities," Goldman Sachs strategists said in a note to clients.
"The market may be poised to continue to shift from the pricing in of hard-landing scenarios to the pricing in of some policy- driven relief and reacceleration."
Manufacturing slowed last month, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing.
The Purchasing Managers’ Index data boosted speculation the government will end a two-year tightening campaign as inflation and economic growth decelerate.
"Chinese growth has clearly slowed, as the most recent PMI data further illustrate,’’ the Goldman Sachs strategists said. ‘‘However, the slowdown remains mild; we expect close-to-trend growth to resume in the coming quarters."
That’s a point HSBC’s chief China economist, Qu Hongbin, has been making now for months after the monthly release of the bank’s survey of Chinese manufacturing.
So we will see tomorrow if these ‘forecasts’ and ‘surveys’ are accurate. If they are, they will add to the belief that the Chinese economy is enjoying a ‘soft’ landing.
