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China’s National Bureau of Statistics (NBS) recently released economic data for October, which indicates a stage of general stability and continuing recovery across critical areas of the economy. NBS noted that a slew of international uncertainties would remain a variable.
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On October 15, China’s National Bureau of Statistics (NBS) released its leading economic indicators up to October. Several indicators, namely industry value-added output, retail sales, investment, and employment, showed that financial operations continue to maintain a recovery trend. The leading macro indicators are generally within a reasonable range.
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Although the Chinese economy still faces challenges in the property sector, strong performance on exports and retail sales and recovery from industrial electricity shortages give a reason for confidence in the country’s investment climate.
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This article looks at how China is navigating its ‘steady recovery,’ discusses existing challenges, and what this translates for foreign investors who would like to set up a company in China, like WFOE(Wholly Foreign-Owned Enterprises), JV(Joint Venture), or RO (Representative Office).
Economic growth indicators are better than expected
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In general, the total value of imports and exports of goods was RMB 31,672.7 billion (approx. US$4955.13 billion), up by 22.2 percent year-on-year (y-o-y) in the first ten months. Although the external environment has become more complex and vulnerable to various uncertainties since the beginning of 2021, China’s exports exceeded expectations, providing a cushion for its economy. The total value of Chinese goods exports was RMB 1,940.8 billion (approx. US$303.63 billion), registering 20.3 percent growth y-o-y in October and 22.5 percent yearly growth in the first ten months, beating forecasts.
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Exports received a boost from global demand ahead of the winter holiday season, reducing power shortages and recovery of supply chains disrupted by fresh coronavirus outbreaks. China’s trade surplus of RMB 545.9 billion (approx. US$85.40 billion) in October was the highest on record – again more elevated than the projected US$65.55 billion. It was also a significant improvement from the US$66.76 billion surpluses recorded in September.
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Market sales were stable and went up; the total retail sales of consumer goods reached RMB 4,045.4 billion (approx. US$632.89 billion) in October, up 4.9 percent y-o-y, 0.5 percentage points higher than the previous month.
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In general, the total retail sales of consumer goods reached RMB 35,851.1 billion (approx. US$5608.83 billion) in the first ten months, up 14.9 percent y-o-y. This was mainly due to online consumption. A WFOE can help investors reduce their unnecessary costs and save money.
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A key economic indicator, industrial output, rose by 3.5 percent y-o-y in October, beating economists’ forecasts. In the first ten months, the total value added by industrial enterprises above the designated size went up 10.9 percent y-o-y, with an average two-year growth of 6.3 percent. Electricity shortages had been a critical constraint on industrial output and eased in October, with power supply climbing 11.1 percent in October from a year earlier. That is a good sign for the ones who want to set up their own business in China and get an import and export license.
What to expect from China in Q4 2021?
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The info below will help you to make the decision if you still consider whether to set up a foreign-invested enterprise in China because of the economic situation in China.
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On November 21, the China Macroeconomic Forum (CMF) pointed out that China’s macroeconomic recovery will continue in 2021. It is expected that the real GDP will grow by 3.9 percent in the fourth quarter, and the annual economic growth will be 8.1 percent, achieving the annual growth target of more than 6.0 percent.
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The current Chinese economy is still on the path of recovery, neither normalizing nor stopping recovery. However, it should also be noted that given international uncertainties, the scope of domestic economic recovery is still restricted.
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In the short term, whether China’s economic recovery can be quickly reversed depends on the following 10 points:
Whether the shortage of coal and electricity can be effectively solved.
Whether the relaxation of real estate credit policy can reverse the current downward trend.
Whether the shortage of automotive chips can be alleviated.
Whether the divergence in commodity prices will continue.
Whether the winter domestic pandemic situation will evolve from sporadic outbreaks to more severe clusters.
Whether the full manifestation of inflation in Europe and the United States will cause China’s demand to continue to rise.
Whether the withdrawal of the United States from quantitative easing will cause adjustments in China’s financial markets at the margin.
Whether the various short-term bottlenecks faced by the global supply chain and industrial chain have been mid-term.
Whether the macroeconomic policy has been repositioned as a whole.
Whether the campaign-style policies can avoid conflicts with each other and avoid cascading costs on businesses.
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