Has China turned the corner with its economic recovery?

The recession in Europe was the main reason for the weaker November result, with exports to that market falling by 18 per cent. Exports to the US were also rather weak, down 2.6 per cent, while exports to Japan fell 3.8 per cent.
Despite the disappointing export results in November, industrial production in China increased over the same period. Chinese factories, workshops and mines reported a double-digit production increase of 10.1 per cent in November – the highest since March – according to the National Bureau of Statistics. This is a strong indication that China’s recovery is being driven by domestic consump-tion. Other figures released by the bureau also support this conclusion, as retail sales, fixed-asset investment and inflation were all strongly up. Fixed-asset investment, a key gauge of infrastructure spending and domestic growth, was particularly strong, rising 20.72 per cent year-on-year in the first 11 months of 2012.
In another indication of the beginnings of a sustained recovery, HSBC’s China Manufacturing Purchasing Managers’ Survey rose to 50.5 in November from 49.5 in October. This is the first time since the previous October that the headline number has topped the 50-point line that marks the move from contraction to growth.
The Chinese Academy of Social Sciences, a top government think tank, is now forecasting gross domestic product to expand 8.2 per cent in 2013, up from an expected 7.7 per cent this year.
Some interesting trends in the recent economic figures include strong growth in consumer goods such as shoes, furniture and plastics.
Growth was strongest in the less-developed central and western regions such as Chongqing, Anhui, Henan, Sichuan and Jiangxi – a sign of China’s shift in production away from the eastern coastal regions.
Wages in China are rising by 15-20 per cent a year, with the minimum wage increasing in the first half of this year by an average of 20 per cent in 16 provinces.
This has not only stimulated a migration to the western provinces where costs are cheaper, but has also encouraged the relocation of manufacturing of textiles, garments, shoes and hats to neighbouring countries such as Vietnam, Indonesia and Malaysia, as well as to the Indian subcontinent.
Southeast Asia is not only playing a greater role as a production base, but also as a market for Chinese goods. China’s export figures in November would have been a lot worse if not for a sharp increase to Southeast Asia.
Recent positive data has led to a growing view that the Chinese economy bottomed out between July and September. This should provide reassurance to countries such as Thailand that are major exporters to China.
With no signs yet of an end to the recession in Thailand’s major markets in Europe and Japan, those interested in expanding their business with China should take note of the emerging trends. Growth is increasingly being driven by the domestic market, the strongest growth is likely to be in the central and western regions and China’s economy is becoming increasingly integrated into Southeast Asia.
For more columns in this series, please see www.bangkokbank.com