China is a key driver of global growth.
China’s $14tn economy, second in size only to the US, accounts for almost a third of global growth each year. That makes it a vital driver of job creation and improved living standards everywhere.
China’s economic rebound from the coronavirus pandemic is gathering pace as the year is drawing to a close.
The manufacturing Purchasing Managers’ Index (PMI) rose to 52.1 in November from 51.4 the previous month, according to the National Bureau of Statistics. That was the highest since September 2017 and beat the median estimate in a Bloomberg survey of economists.
The official non-manufacturing PMI rose to 56.4, the fastest since June 2012 and up from 56.2 in October, as consumer confidence gathered pace amid slowing Covid-19 infections.
The data showcases China’s status as the only major economy to see a sustained and robust rebound from the pandemic-induced slump earlier this year.
“China’s domestic recovery has been on track in recent months, thanks to its successful containment of Covid-19, the relaxation of social distancing requirements, exceptionally strong exports,” according to Nomura Holdings economists. “We expect China’s official manufacturing PMI to remain solid at around 51-52 in coming months.”
A set of early indicators also showed China’s economic recovery stabilised in November, underpinned by exports and the stock market’s gain to its highest since 2015.
While consumption lagged in the early-stages of China’s recovery this year, more recent data has shown a pick-up in consumer demand. Beijing has vowed further measures to support sales of autos and home appliances.
The People’s Bank of China has signalled in recent weeks that the sustained growth momentum will allow it to phase out easing measures introduced earlier in the year to support businesses.
However, the transition is likely to be gradual and the central bank has signalled a willingness to ease fears about tighter cash supply by adding liquidity to the banking system.
Monday’s data also showed the labour market is still facing strains.
Services firms cut payrolls at a faster pace in November, while factories trimmed workers for the seventh straight month, although at a slower pace.
With the pandemic under control and consumer spending picking up, authorities are now turning their focus to longer-term growth objectives and discussing withdrawing the emergency stimulus injected into the economy earlier this year.
For sure, there are lingering challenges.
The economy is loaded up on debt. Slower growth challenges China’s ability to stem the buildup of its government, corporate and household debt, which according to Bloomberg Economics is on track to add up to more than 300% of GDP by 2022.
The bigger that debt pile becomes, the harder the impact on global growth should it all go sour.
Even before the damage brought about the pandemic, the trade war with the US has already been hurting China’s economy.
The enduring challenge for China, however, is how to wean the country off its debt drip without intensifying an economic slowdown, not just in the country, but across the world.
A recovering China, undoubtedly, makes good news for the global economy.
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