Although first to succumb to the coronavirus pandemic, China – following strict measures and an eventual resumption in activity, flourished. 

China’s economy – previously battered, and witnessing a historic slump, shrinking by 6.8 per cent year-on-year – is now pointing towards the prospect of being the only major economy to experience expansion this year. For 2020, the International Monetary Fund (IMF) is forecasting a growth of 1.9 per cent, followed by further acceleration to 8.2 per cent in 2021. 

Following the sharp contraction in economic activity, economic data portraying an industry-powered rebound, significantly improved, powering ahead in November – as crucial indicators of activity rose at their fastest rates this year. 

In November, China reinforced its recovery trend. General Manufacturing PMI rose to 54.9 from 53.6 in October, this pointing to the seventh straight month of growth in factory activity and the strongest since November 2010. 

Both output and new orders rose at the fastest rate in a decade while employment grew the most since May 2011. Also, buying levels increased at the steepest pace since the start of 2011, with stocks of purchases rising the most since February 2010. Simultaneously, capacity pressures persisted, with the rate of backlog accumulation being the quickest since April. Despite easing slightly since October, sentiment remained positive.

More recently published economic indicators affirmed China’s continued improvement in economic conditions.

China's industrial production – a gauge of manufacturing, mining, and utilities output – increased by seven per cent year-on-year in November, edging up from 6.9 per cent in the previous month, and the highest since March 2019. The reading was in-line with market expectations, as activity continued to recover from the coronavirus shock. Among major industries, production rose for chemicals, communication, electrical machinery, non-metal minerals, and power equipment. 

Adding to signs of a more comprehensive economic recovery is China's retail sales – an area which only recently showed promising signs following a period characterised by households remaining relatively cautious in overspending. 

Following a 4.3 per cent gain in October, retail trade rose by five per cent year-on-year, just below market consensus of a 5.2 per cent growth. Despite concerns that consumption was lagging behind a broader economic recovery in China, the reading, sustained by ‘Singles Day’: one of the world's biggest shopping festivals, pointed to the fastest growth in retail trade since December last year. 

Auto sales saw an 11.8 per cent growth, and building materials grew by 7.1 per cent in November. Telecom equipment sales and jewellery jumped by 43.6 and 24.8 per cent respectively. 

Lastly, in November, China's unemployment declined to 5.2 per cent, from 5.3 per cent in the previous month – a figure last witnessed in December 2019; pre-coronavirus levels.  November’s rise in retail sales – at the fastest level in 2020, undoubtedly portrays China’s continued economic recovery, now, across all fronts. 

Going forward, we expect output to remain above-trend, at least in the near term, as households run down the excess savings they have accumulated in this unprecedented year. 

Disclaimer: This article was written by Christopher Cutajar, credit analyst at Calamatta Cuschieri. The article is issued by Calamatta Cuschieri Investment Services Ltd and is licensed to conduct investment services business under the Investments Services Act by the MFSA and is also registered as a Tied Insurance Intermediary under the Insurance Distribution Act 2018.

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