China Rebound Accelerates as Xi Confronts 8.1% Unemployment Rate

China’s factory output and retail sales topped forecasts last month in signs that an economic recovery is accelerating, improvements that may pare a jobless rate newly estimated at almost double the official figure.

Industrial production climbed 10.1 percent in November from a year earlier and retail sales growth accelerated to 14.9 percent, while inflation was 2 percent, the statistics bureau said yesterday. The urban unemployment rate exceeded 8 percent this year, a central bank-backed research center said yesterday in Beijing, citing a household survey.

China’s economic revival and inflation running at half the pace of this year’s target may help the Communist Party’s new leadership maintain public support after a once-a-decade power transition. Challenges for the nation’s next president, Xi Jinping, include a wealth gap that the same household survey indicates is 50 percent higher than the level that risks triggering social unrest.

“The recovery is being driven by policy easing and credit and that’s not very sustainable in the long term,” said Zhang Zhiwei, chief China economist at Nomura Holdings Inc. in Hong Kong, who previously worked for the International Monetary Fund. “The government needs to do much more on structural reform. There’s not that much debate about what needs to be done but these reforms haven’t been done yet because they are difficult.”

Zhang cited “opening up monopolized sectors to private investment” as an important change.

Jobless Rate

The urban jobless rate in July was 8.1 percent, based on a survey of 8,438 households by the Survey and Research Center for China Household Finance, a body set up by the central bank’s Institute of Financial Research and Southwestern University of Finance and Economics in Chengdu, southwest Sichuan province.

That compares with a U.S. unemployment rate that was 7.7 percent last month, government data showed last week, down from 8.3 percent in July. The figures are based on a survey of about 60,000 households conducted by the U.S. Census Bureau for the U.S. Bureau of Labor Statistics.

China’s urban registered jobless rate, the only official measure of nationwide unemployment, was 4.1 percent at the end of September, unchanged from the previous eight quarters, according to data from the labor ministry in Beijing.

The nation’s customs administration will today release November trade data. Export growth probably cooled to 9 percent from a year earlier, according to the median estimate of 31 analysts in a Bloomberg News survey. Imports rose 2 percent, easing from a 2.4 percent pace the previous month.

Yuan Loans

The People’s Bank of China will also this week release money supply and lending figures for last month. New local- currency loans probably fell to 550 billion yuan ($88 billion) from 562.2 billion yuan a year earlier, according to the median forecast in a Bloomberg survey, while M2, the broadest measure of money supply, may have risen 14.1 percent, unchanged from October’s pace.

China’s benchmark stock gauge, the Shanghai Composite Index (SHCOMP), rose 4.1 percent last week, the most in a year, on expectations the recovery will gather pace and as the Politburo signaled an increased focus on urban development.

Industrial-production growth compared with the 9.8 percent median estimate of analysts in a Bloomberg survey, while the rise in retail sales exceeded the 14.6 percent median estimate.

China’s fixed-asset investment excluding rural households in the first 11 months of the year rose 20.7 percent, the same pace as in the January-October period.

Below Target

Consumer inflation compared with 1.7 percent in October and marked the 10th straight month below the government’s 2012 target of 4 percent. Producer prices fell 2.2 percent, the ninth straight drop, while the pace of the decline moderated for a second month.

“Chinese authorities will continue to guard against the inflation risk in 2013,” and the central bank will have to pay more attention to managing price expectations, Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong, said in a note yesterday.

Caterpillar Inc., the world’s biggest construction and mining equipment maker, is seeing signs of recovery in China and expects economic growth to increase next year as the government focuses on rural migration to towns and cities, Chairman and Chief Executive Officer Doug Oberhelman said in an interview with Bloomberg Television on Dec. 6.

“The Chinese economy is now in a sweet spot and can stay in the sweet spot” through the first half of 2013, Lu Ting, head of Greater China economics at Bank of America Corp. in Hong Kong, said in a note yesterday. “The current macro backdrop should bolster asset prices from equities to commodities.”

Inequality Gauge

The Gini coefficient, an index measuring income inequality, was 0.61 in China in 2010, the center’s survey showed. The guideline ranges from 0, which represents perfect equality, to 1, which implies perfect inequality. Readings above 0.4 are used by analysts as a gauge of the potential for social disturbances.

The ruling Communist Party has pledged to narrow the gap between rich and poor and address corruption that’s fueling discontent in the world’s second-biggest economy. Reducing inequality is one of the main challenges facing China, the World Bank said in a February report that outlined policies to help the nation make the transition to a high-income country.

“China must change the structure of income distribution and rely on massive fiscal transfers to narrow such a yawning disparity,” Gan Li, director of the center and a professor at Texas A&M University in College Station, Texas, said at a briefing yesterday.

Xi visited the southern province of Guangdong last week in his first trip since taking over as head of the party last month, drawing parallels to a 1992 southern tour by paramount leader Deng Xiaoping that spurred economic opening. Stops included the experimental zone of Qianhai that’s a pilot for a yuan convertibility trial, according to the South China Morning Post, which cited an unidentified propaganda official.


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PS.  Cycles come and go as do the prosperity of any country and their citizens.  Therefore, companies' wealth and investors' wealth also comes and goes.  The results depends on companies' management and yourself.  Good to great management means survival and prosperity versus bad to ugly management that turns any short term gains into zero....goes for all companies big to small versus retail and professional investors versus all the promotional fluff in companies and usual riftraft of ids professing riches versus the many that do the same via their ratings.  The whos who in real world and web of the herd vs realty vs contraian.  What's your reality?


PSS.  Time sure flies, almost 20 year anniversary in the market casino for me, from mutuel funds, 1993 to selling them out to go building my own diversified portfolio, 1995.  Seen so much, learn so much about the markets and myself, how it behaves and how I behave thru the countless bubbles and scandals.  Here's to another great 20 years and well into my retirement by then.  :)


PSSS.  Thanks for the readership here and on Twitter.  Tis the season.  Merry Christmas, Happy, Healthy, Prosperous New Year to all.  :)