China's latest economic indicators show that the Chinese economy has maintained momentum. Although China's domestic economic activity shows signs of a mild slowdown, their external trade remained solid. China's economy continues to expand, but industrial manufacturing and investment have cooled, underscored by November industrial output rising 6.1 percent YoY, below the 6.2 percent gain in October, decelerating for a second month in a row. At the same time, China's fixed-asset investments have slowed from early in the year to 7.2 percent growth YoY over January-November (11M17), versus the 7.3 percent YoY increase over January-October (10M17), marking a fifth consecutive monthly decline and the lowest growth so far this year.
In spite of slowing domestic demand, Chinese exports rose 12.3 percent YoY in November, versus a 6.9 percent increase YoY in October. China's outbound trade is being driven by the economic recoveries in major trading partners, e.g., the United States and the European Union. In November, the value of Chinese shipments to the US jumped 14.3 percent YoY, while their export value to the EU surged 13.2 percent. In addition, Chinese exports were bolstered by a cyclical uptrend in demand for electronics. As for the outlook toward the end of 2017 and into early 2018, international trade will remain one of the most important growth engines of the Chinese economy.
KResearch expects that Chinese economic growth this year will surpass the 6.50-percent YoY target set by the Chinese government. Looking ahead, KResearch anticipates that the Chinese economy will cool somewhat to 6.6 percent growth in 2018, versus the forecast 6.8 percent growth YoY this year. Chinese economy will likely be driven by exports and public investment, even though that growth may lose steam somewhat as China's leadership focuses more on economic reform.
The Central Economic Work Conference, December 18-20, 2017, will no doubt provide an opportunity for China's leaders to map out further economic reform plans. Beijing is likely to issue additional measures to curb credit expansion in 2018. As for inefficient state-owned enterprises, KResearch expects that the Chinese government to expedite more reforms next year.