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China market round-up: GDP growth hits record low, CPI inflation rises, credit data surprises on the upside

By Rebecca Feng
18 Oct 2019

In this round-up, China’s third-quarter GDP growth fell to 6%, September’s CPI inflation jumped due to continued surge in pork price and money and credit growth both exceeded market expectations

China’s third quarter GDP growth fell more than expected to a record low of 6.0% year-on-year, the National Bureau of Statistics (NBS) announced on Friday morning. GDP growth for the second quarter was 6.2%.

“This 6.0% quarterly growth reading marks the record low since 1992 when the National Bureau of Statistics first released the quarterly series,” Ting Lu, chief China economist at Nomura, wrote in a Friday note.

“We believe Beijing will need to partly reverse the tightening measures on the property sector towards end-2019 (by no later than spring 2020), as we believe its current policy easing plan – which excludes the property sector – is likely to backfire,” he added.

September’s industrial production growth rebounded to 5.8% year-on-year from August’s 4.4%. Retail sales grew by 7.8% year-on-year compared with 7.5% in August.


China’s Consumer Price Index (CPI) inflation rose to 3.0% year-on-year in September from 2.8% in August. The increase was mainly driven by the surge in pork price inflation, which jumped from 46.7% in August to 69.3% in September, according to NBS data.

Producer Price Index (PPI) inflation dropped to -1.2% year-on-year in September from -0.8% in August.

“We expect headline CPI inflation to remain above 3.0% over coming months on higher pork prices and as unfavourable base effects for vegetable prices fade,” Nomura’s Lu wrote in a Tuesday note. “We further see a risk of it rising to around 4.0% in January 2020, when China holds its annual lunar new year holiday.”


New renminbi loans totalled Rmb1.69tr ($239m) in September, according to data published by the People’s Bank of China on Tuesday. Total social financing, a broader measure of lending that includes shadow banking, grew by Rmb2.27tr, higher than the Rmb1.98tr increase the month before.

Most analysts saw the September numbers as a signal for a potential rebound in credit growth, which had been sluggish in recent months. That rebound could be the result of Chinese regulators’ easing policies such as cutting the required reserve ratio in mid-September and issuing window guidance to large bank lenders.

However, at least one voice stood out from the crowd.

“Pretty much everyone is getting the analysis of these numbers wrong because they are focusing on the wrong thing,” Trivium, a consulting firm, wrote in a Wednesday note. “We know we sound like a broken record but what matters is not the flow of new lending, which is what the numbers above show. What matters is the growth of outstanding loans.”

The firm pointed out that outstanding TSF grew by 10.8% year-on-year in September, the same rate with August. Outstanding renminbi loans grew by 12.5%, up slightly from 12.4% growth in August.

“The dynamics that have been driving weak overall credit growth for the past two years did not change one iota last month,” it added.


China’s exports contracted by 3.2% year-on-year in September in US dollar terms. The contraction was 1.0% year-on-year in August. Imports saw a larger decline of 8.5% year-on-year, according to data from China’s General Administration of Customs. The trade surplus widened to $39.7bn in September from $34.8bn the month before.

Exports to the US posted a much larger year-on-year decline of -21.9% in September than -16.0% in August.


China reduced its holdings of US Treasuries again in August. The country now holds $1.1035 trillion of US debt, a $6.8bn decrease from July, according to data released on Wednesday by the US Treasury Department.


In the first nine months, Chinese entities invested a total of Rmb555.1bn to 5016 offshore corporations, a 3.8% year-on-year increase, the Ministry of Commerce said in a Thursday press conference.

In September alone, investment from Chinese entities to offshore corporations totalled Rmb62bn, a 14.2% year-on-year increase.

By Rebecca Feng
18 Oct 2019