China economy remains sound in November

Thanks to PMI rising to its highest level in over two years.

Standard Chartered believes that China's real activity indicators may have continued to recover and trade performance likely improved with PMI strenghtening further in November

"The official manufacturing and non-manufacturing PMI readings suggest that the economic recovery continued and growth momentum picked up on supportive policies, easing concerns over the stability of the near-term economic outlook," it said.

China’s manufacturing PMI improved to 51.7 in November from 51.2 in October, beating market consensus and rising to its highest level since August 2014.

Production appears to have continued to expand on rising domestic demand, as the production and new orders sub-indices continued to climb.

The non-manufacturing PMI strengthened to 54.7 from 54.0 in October, and the services PMI rose 1.1ppt to 53.7, suggesting that the services sector maintained a robust expansion pace, serving t stabilise the economy.

StanChart's composite PMI rose substantially to 53.4 from 52.8 prior.

Here's more from StanChart:

We forecast industrial production (IP) growth of 6.3% y/y in November; investment likely grew by 9.1% y/y, resulting in slightly higher YTD growth of 8.4%, as still-resilient demand and improving profitability supported production. The contraction in export and import growth probably eased on a pick-up in new export orders and higher commodity prices, causing the trade surplus to narrow in November.

We estimate CPI inflation of 2.3% y/y in November largely due to a low base effect and higher vegetable prices. PPI
inflation likely surged to 3.1% y/y on the jump in metal prices.

M2 growth likely slowed to 11.2% y/y on a tightening of market liquidity. Persistent capital outflows and valuation losses may have taken a toll on FX reserves. Despite the

current real activity indicators boding well for Q4-2016, China’s uncertain external environment, the property-market tightening impact and lower fiscal spending in Q4
indicate a soft start in 2017. We forecast GDP growth rates of 6.9% y/y in Q4 and 6.8% in 2016.

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