20-12-2016

Dry Bulk: Turnaround in Chinese Economy Has Intensified Recently, says Commodore Research

Commodore

According to the most recent Weekly China Report published by Commodore Research, it has remained encouraging that the turnaround in China’s economy has intensified recently. Particularly important to Commodore Research is that Chinese steel output growth last month rose to the highest level seen this year, Chinese spending set a record in October and was very strong again last month, and Chinese electricity production growth has remained at a robust level since July. China’s overall industrial production growth has also stayed strong, as Chinese industrial production grew year-on-year in November by 6.2%.

The strong growth in China’s industrial production has continued to represent a particularly stark contrast from many other nations including the United States and even India. According to Commodore Research, each of the last fifteen months have seen US industrial production contract on a year-on-year basis. Most recently in November, US industrial production contracted year-on-year by 0.6%. Prior to this current fifteen-month period, the last time there were even two straight months of year-on-year US industrial production contraction was back in 2009.

Indian industrial production data for October was also released last week (Indian data lags behind Chinese and American data), and October saw India’s industrial production contract year-on-year by 1.9%. Indian industrial production has now contracted on a year-on-year basis during three out of the last four months. Overall, industrial production remains just one area where China continues to fare a great deal better than much of the rest of the world. As highlighted in Commodore Research’s December 12th Weekly China Report, China has continued to maintain its overall dominance in both global trade and foreign exchange reserves as well.

China remains one of only two nations holding foreign exchange reserves totaling $1 trillion or greater (Japan is the other nation and currently holds only approximately $1.2 trillion in foreign exchange reserves). Chinese trade also continues to come in at an impressive surplus, and most recently its trade surplus totaled approximately $44.6 billion in November. To put Chinese trade into perspective, many nations (including the United States and India) have not achieved a trade surplus in any month this decade accord to analysis from Commodore Research.

Heading into the new year, it is very encouraging that the turnaround in China’s economy has continued to intensify recently. The 5% year-on-year growth in China’s steel output last month marked the strongest growth seen this year. Chinese spending has also broken through the 3 trillion yuan barrier in each of the last two months. In addition, China’s year-on-year electricity production growth has come in at least 8% during each of the last five months, which marks a huge change from low growth seen in late 2015 and early this year. Three out of the last four months of 2015 did not see any year-on-year growth in China’s electricity production and January and February only saw year-on-year growth of just 2%.

Going forward, Commodore Research anticipate that’s Chinese lending will stay very strong next year, and that more records in consumer spending will be set. Recently released data showed Chinese consumer spending totaled approximately 3.1 trillion yuan in November, which marked only the second time in history that spending climbed to 3 trillion yuan or higher (the first time was in October). Overall, it is encouraging that each of the last two months have seen China’s consumer spending exceed 3 trillion yuan. The outlook for the Chinese economy next year remains very encouraging, especially in comparison with much of the rest of the world.

Source: Commodore Research

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