China’s economy shows continued strength

China’s economy has shrugged off concerns over a rough landing with increased manufacturing data, retail sales and a stable inflation outlook. The National Bureau of Statistics (NBS) has published figures that show the world’s second largest economy is likely to post a strong fourth quarter of growth.

As reported by SkyNews, industrial output for October was up 10.3% year-on-year, slightly ahead of September, which showed an increase of 10.2%, and ahead of expectations from analysts. In addition to strong factory and mine output was a boost in retail sales. From a year earlier, October retail sales were up 13.3%, which means Chinese consumer confidence could well be on the rise.

Although some economists had become concerned over inflation, the country’s consumer price index (CPI) increased marginally to 3.2% and was pushed higher by rising food prices. This prompted ANZ (ASX: ANZ) economists Liu Li-Gang and Zhou Hao to believe inflation remains under control. “While the CPI inflation is likely to exceed 3 per cent again in November, the whole year inflation will be around 2.7 per cent, well below the control target of 3.5 per cent.”

Chinese exports also grew by 5.6% year-on-year to $196.80 billion after a small fall in September, which gives support to an overall rebounding economy.

The government is determined to move away from its own investment in hopes the private sector will lead it towards more sustainable growth. Although, despite its intentions, government spending on infrastructure rose 20.1% in the first 10 months of 2013.

Foolish takeaway

Australia’s economy has been buoyed by strong Chinese growth and its demand for natural resources. However if the government is determined to transition the economy from its rapid growth into a more sustainable, serviced-based economy, it would eventually require less demand for raw materials such as iron ore – Australia’s most lucrative commodity. However Australia’s two biggest iron ore exporters, Rio Tinto (ASX: RIO) and BHP Billiton (ASX: BHP), predict China’s demand for steel will not peak till around 2030.

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Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.

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