Going Too Fast Off-Balance Could Trip China’s Recovery

THE LATEST BATCH of high-frequency economic data from the National Bureau of Statistics raises a couple of red flags about the unbalanced nature of the recovery and a reminder that China cannot get too far ahead of the rest of the world’s steep climb up the cliff of recovery.

Retail sales gained 4.3% year-on-year in October but lagged industrial output, up 6.9% for the same period, while in January-October, private firms invested 0.7% less year-on-year, while state-owned firms invested 4.9% more. Goods imports were down 2.3% year-on-year in January-October. Exports gained 0.4% in January-October, but if the resurgence of COVID-19 cases in the United States and Europe continues, global demand will stall again, and with it, demand for China’s exports,

On the sunny side of the ledger, more than 10 million jobs were created from January to October. This is 1 million more than the annual target, and thus will tilt the balance of the argument about where growth should come from away from more stimulus and towards domestic consumption.

That is the long-term plan for the economy, but the longer short-term recovery remains unbalanced, the more the risk of financial instability grows.

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