China could show some serious economic growth according to an RBS report:
This week features a very important batch of macroeconomic data from China (on Thursday), including Q3 GDP, inflation and industrial production for September. The strong rebound in activity in emerging Asia attracted the attention of market participants during the summer, as they were relentlessly focusing on assessing the shape and the pace of the nascent recovery. In July,
the preliminary estimate of the Q2 GDP figures for Singapore and Korea (an annualised 20% after a series of quarters of negative growth for the former and a 9.7% annualised for the latter – the fastest quarterly growth in more than five years) were already hinting that the region was in recovery mode and that growth dynamics were stronger than in the developed world, thanks to the resumption of
the global trade cycle, the strong policy support and much healthier internal demand.
China in particular was under unusual scrutiny as its robust growth is considered an important element for the sustainability of the recovery at the global level. Markets proved to be particularly sensitive to the news coming from China on a number of occasions: at the end of July, fears that authorities could put the brake on robust Chinese growth by imposing tighter bank lending and avoid overexpansion made Chinese equity market fall by about 5% (on the Shanghai Stock Exchange Composite Index) on 29 July. In addition, the weaker-than- expected industrial production report for August cast some doubts about the sustainability of the recovery and contributed to a reassessment of the country’sgrowth outlook that likely triggered its stock market correction in August andcertainly had an influence on the perception of the recovery also in developedmarkets.
The particuarly interesting part is in Page 2 of the memo, where China’s expected Q3 GDP is discussed:
A good set of Chinese data on Thursday would undoubtedly be positive for markets. Our chief China economist, Ben Simpfendorfer, tells us that “China’s Q3 GDP is rumoured at 9.1%, above market expectations. Following the stronger export and commodity import figures, it will be tempting to assume the pace of recovery has strengthened sharply. And public investment is indeed strong. Yet the quarterly data provide no expenditure-side details making it difficult to determine the drivers of growth. A strong GDP figure may thus disguise what is still weak private business investment. Indeed, September’s export orders were stronger, but largely because foreign retailers had earlier delayed placing orders on an uncertain demand outlook and overcapacity in light manufacturing remains a problem.