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ECONOMY: DATA POINTS TOWARDS FURTHER STABILIZATION
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DATA POINTS TOWARDS FURTHER STABILIZATION

By Anthony Lawry


BT 201703 ECONOMY 01Chinese manufacturing data showed the sector expanded in January as official data points to further stabilization in the overall macroeconomic picture despite external issues threatening the so-called soft landing. The official manufacturing statistic commonly referred to as the Purchasing Manager's Index (PMI) looked as though manufacturing expansion was higher than expected at 51.3. Despite this expansion, it was down from 51.4 in December, but again still better than 51.2 as expected. A statistic of PMI above 50 indicates manufacturing expansion while below 50 is read as manufacturing contraction.


The official non-manufacturing PMI for services industry within China rose in January compared to the month before. In spite of the decline, a number of economists such as Capital Economics' China specialist Julian Evans-Pritchard suggested that the manufacturing data was healthy and strong. He suggested this was because the PMI was only a little bit off from the two-year high of 51.7 in November. He further asserted that the increase in services sector was helping to offset the cooling off of the construction sector, further indicating that the recovery is "largely intact for now."

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Another interesting economic data point to take into consideration was the fact that foreign exchange reserves fell for the sixth straight month in December as reported in January. This decline added up to $41 billion in total for the month marking it at $3.011 trillion, making it the lowest level since 2011. This trend of foreign exchange reserves, while China is still maintaining the lead as the world's largest holder of foreign-exchange reserves, is closing the gap between China and Japan which holds $1.4 trillion in foreign-exchange reserves.


China's GDP stood at 6.8 percent on-year in the final quarter of 2016 as was recently released by official figures. This is also up from figures estimated which suggested fourth quarter GDP data would be at 6.7 percent. Even so, GDP for the year was at 6.7 despite the 6.8 percent fourth growth GDP increase. Nonetheless, this is a positive development which contributes to the overall positive mood in China's economy.


Exports grew in January significantly which was a rebound from December's export figures which contracted at a surprisingly low rate. Exports rose by 7.9 percent from a year-on-year prior to $18. 3 billion which was a recovery from December's 6.1 percent slide. Imports also grew by 16.7 percent to $13.1 billion which was an acceleration from the 3.1 percent increase from the month prior. Taking all of this into consideration, it should also be noted that the Lunar New Year holiday can significantly distort data in January, so figures may be lower than would actually be reflected in the overall economy had the New Year not affected growth, exports and import figures. Furthermore, surveys from various manufacturers showed economic activity grew in January but financial and economic analysts signaled that might not last as Chinese regulators tighten lending controls to slow what they deem a dangerously fast rise in debt and surging housing costs.


Regardless, the emphasis on trade data cannot be overdone. It shows a clear break from the rest of the global economy which is slowing significantly as the World Bank reduced global growth figures for 2017 recently. Nonetheless, the export data is the fastest year-on-year increase for the Middle Kingdom since March 2016. Additionally, in terms of the strength of RMB exports figures rose by 15.9 percent in terms of inflation. Furthermore demonstrating that firm demand, volumes of iron ore and crude oil hit the second and third-highest levels on record in January. In terms of RMB-denomination, the value of imports increased by a whopping 25.2 percent. Overall, the trade data was significant and should not be underestimated.


With the dollar value of exports increasing faster than imports, the trade surplus soared to $51.3 billion, above the $40.7 billion figure of December and forecasts for an increase to $US47.9 billion. This is the highest level since January 2016 which reflects the opinion that the Lunar New Year may have contributed to the incredible increase in economic data figures. However, this will not be fully known until the coming months. Nonetheless, this is typically the trend every year and it would not be surprising if the Lunar New Year positively contributed to these figures. Also, we will get a much better view of trade data in April when March trade figures will be released. It will also be the month in which trade data distorted from the Lunar New Year will have subsided since February's trade data will also be distorted by the same.


On a final positive note, this monthly data analysis will be significantly more substantial in future as Vice Premier Zhang Gaoli indicated that the falsification or manipulation of economic data would be punished in future. This is in light of some foreign skepticism surrounding the accuracy of official data. This will significantly increase the weight of monthly data reports and should be noted for future consideration. Regardless, recent trade data was a good relief from the calamities of past data figures and the immediate future looks positive.


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