China will publish the October’s macro data later this week. September and third quarter macro data strengthened the consensus expectation that finally economic activity is picking up in the fourth quarter after being disappointing for the best part of the year.
While our medium and long term view remains more or less unchanged (i.e. pessimistic), activity will probably pick up towards the end of this year, partly because of seasonality (particularly in exports) and the slow but steady pick up of growth in infrastructure. Although the weaker US dollar compared to the summer probably helped, the impact from QE-Infinity in terms of possible inflow appears to be much more limited than I initially thought.
There will certainly be arguments to be made about whether this pick up of economic activity represents a sustainable recovery or simply a blip, and one might continue to question the strength of the recovery in areas other than infrastructure investments. There will also be legitimate argument on whether the pick-up in infrastructure investments and real estate market (intentional or not) point to the possibility that the government may go for growth by delaying the progress of structural adjustment once more.
For the time being, however, the fourth quarter of this year is unlikely to give nasty surprises.
