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Economy

November data paints grim portrait

HONG KONG -- Although China's industrial output and retail sales exceeded expectations in November, property development investment and the purchasing managers' index continued to slump, painting an overall economic picture that Leo Wong, analyst at CNI Securities Group, said was as "weak as ever."

     Industrial production saw a 6.2% year-on-year bump, the strongest pace since June, government data released through Saturday showed. Retail sales soared 11.2%, the biggest jump in 11 months.

     However, both figures may be temporary asterisks. For the former, factories were put into operation more days than in the year-earlier period, according to Bank of America Merrill Lynch. Retail sales received a leg up from Singles' Day, China's answer to Cyber Monday, UBS pointed out.

     Meanwhile, the PMI stood at 49.6, depths not plumbed since August 2012. Investment in real estate development sank to a roughly seven-year low. Imports and exports once again fell short of the previous month, continuing a trend that has persisted throughout the year.

     Because Chinese Premier Li Keqiang says the country is transforming from a manufacturing-based economy to one focused on services, efforts are being put into creating a new "Li Keqiang index" centering on employment, income and environmental indicators. This is a switch from the old index made up of electricity consumption, railway cargo volume and new bank loans, which some say is a better economic gauge than the official data.

     However, it may be too early to lend much credence to the new index since "one cannot say the industrial sector has absolutely no effect on the overall economy," said Wong.

     Gross domestic product for the quarter through December will rise by roughly 6.9%, said UBS, joining the ranks expecting the number to fall short of the government's 7% target.

     The consumer price index recovered in November, cooling speculation of further monetary easing measures in the near future. The government might cut policy rates only twice next year, down from five such reductions this year, Haitong Securities said in an outlook for 2016 released this month.

     Despite the series of rate cuts, property development investment failed to improve, and a rate slash at the end of October was an apparent nonfactor in November's data. Analysts say the looser money supply invited speculation on equities rather than spurring domestic demand. "They may switch to monetary tightening in the future," Wong said. 

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