China Economic Data Shows Stability and Growth

China Economic Data Shows Stability and Growth

China’s economy as a whole, the PPI data offered a broad positive as rising prices could boost corporate profits and help contain financial risks.

Tuesday’s data also showed the consumer price index (CPI) grew 2.5 percent year on year last month, fractionally above market expectations of 2.4 percent.

Food prices, which account for about one-third of China’s CPI, went up 2.7 percent, while non-food prices increased 2.5 percent.

On a monthly basis, consumer prices went up 1 percent.

The central bank has already started to guide market rates higher. In open market operations earlier this month, it raised the lending rates to banks by 10 basis points, a move widely interpreted as a shift towards a more neutral monetary policy as economic fundamentals improved.

China’s monetary policy in 2017 is set to be “prudent and neutral” to keep appropriate liquidity levels and avoid large injections.

Heffx do not expect any more drastic moves such as benchmark interest rate hikes in the near future amid lingering concerns about the growth outlook. Instead, policymakers will be more likely to continue its use of open market operations and other targeted instruments to adjust liquidity.

On Tuesday, the central bank injected 130 billion yuan (about 18.9 billion U.S. dollars) to the financial system through reverse repos as 230 billion yuan of securities matured, which means 100 billion yuan has been drained from the market.

The producer price index (PPI), which measures costs of goods at the factory gate, jumped 6.9 percent year on year last month, beating market expectations of 6.5 percent and marking a five-year high, according to the National Bureau of Statistics (NBS) Tuesday.

The jump was mainly driven by the carry-over effect of last year’s price changes and rising prices of raw materials and oil and gas in the global market, according to NBS senior statistician Sheng Guoqing.

Factory-gate prices in the oil and gas extraction industry surged by 58.5 percent during the month, followed by a 38.4 percent gain in coal mining.

Private Equity

China’s private equity industry posted strong growth momentum last month, with total assets nearly touching 11 trillion yuan (around 1.6 trillion U.S. dollars).

Chinese private equity firms have assets totaling 10.98 trillion yuan under management at the end of January, a soar of 740 billion yuan from the end of 2016.

There were around 18,000 officially-registered private equity firms at the end of January, employing more than 280,000 people and managing over 47,500 fund products.

The number of private equity firms with assets of at least 10 billion yuan reached 147 at the end of last month.

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Shayne Heffernan Funds Manager at HEFFX holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financial Services.