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1st LD-Writethru: News Analysis: China economy shows solid foundation

Xinhua, January 3, 2017 Adjust font size:

China's GDP growth is expected to fall solidly in the target range of 6.5 percent to 7 percent as both official and private data point to a stabilizing economy.

China's manufacturing sector continues to expand, with the purchasing managers'index (PMI) hitting a 47-month high in December, a private survey showed Tuesday.

The Caixin factory PMI, based on surveys of small and medium enterprises, came in at 51.9 in December, up from 50.9 in November, according to the survey by financial information service provider Markit, sponsored by Caixin Media.

It was the biggest index rise since January 2013, with production growing at the fastest pace in nearly six years due to higher numbers in new work.

Official manufacturing PMI, which surveys larger companies, stood at 51.4 in December, lower than 51.7 in November but above the boom-bust line of 50 for the fifth straight month, the National Bureau of Statistics (NBS) said Sunday.

"The Chinese manufacturing economy continued to improve in December, with the majority of sub-indices looking optimistic," said Zhong Zhengsheng, director of macroeconomic analysis at CEBM Group, a large investment research firm.

Alongside booming factory output, profits of China's major industrial firms increased 14.5 percent year on year in November, up from 9.8 percent in October, official data showed last week.

China's non-manufacturing industries also showed strong expansion in December, second only to November this year, the NBS data showed.

GDP growth in the fourth quarter of 2016 is expected to stay flat at 6.7 percent year on year, with stronger fixed asset investment and retail sales in December, according to China International Capital Corporation.

China's target for GDP growth was 6.5 percent to 7 percent in 2016, and it saw stable 6.7 percent growth in the first three quarters.

"However, it remains to be seen if stabilization of the economy can be consolidated, due to uncertainty if restocking and consumer price rises are sustainable," Zhong said.

Inflationary pressures remained sharp in December, with the Caixin factory PMI showing input prices picking up to their highest since early 2011, amid reports of higher raw material costs.

The basic plan of "seeking progress while maintaining stability" will be an important principle in state governance and methodology for economic work, with implementation of critical importance for 2017, according to the Central Economic Work Conference.

China International Capital Corporation expect macro data in December to show continued broadening of reflation in mid-to-downstream industrial sectors, which may lead to further recovery in manufacturing investment.

Meanwhile, the corporation has observed early signs of an upturn in credit demand from the private and manufacturing sectors for the first time since 2011.

"We remain hopeful that nominal growth and profitability will continue on the mend in 2017," the corporation said. Endi