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Why China remains important for global positivity

Chinese markets remain integral to global stability
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China remains the world's manufacturing powerhouse and therefore ongoing instability in the Asian nation's economy should be a worry for all.

"Given that the growth rate of fiscal income has slowed recently while expenditures have swung, there is insufficient momentum to drive future economic growth, and there is a risk that industrial output may decline."

- Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group

The week ahead will see the publication of the latest trading data figures from China, with the Asian nation continuing to hold considerable sway over the outlook of the global economy in the weeks and months to come.

China's September trading figures will be released on Wednesday (October 12th) and analysts have predicted the data will showcase an increase in the country's trading surplus from its August result of $52 billion (£41.8 billion).

Meanwhile, the nation's exports are also forecast to have fallen by around 3% during the course of the last 12 months, while imports are expected to have risen by just over 1%. It means a continued slowdown in economic growth for the country is expected, which, in turn, could impact the economic performance of many of the world's leading nations.


Still a major manufacturing nation


The impact of the country's fall in exports can be linked to a more general economic malaise that has gripped major markets in recent months. Indeed, issues of weakening cost efficiency in China and higher commodity prices have served to reduce the country's attractiveness as the go-to manufacturing centre of the globe.

Overall, factory output remains one of the key indicators of strength within the Chinese economy. However, the year to date has seen a considerable reduction in levels of growth in this area.

The China-Caixin Manufacturing Purchasing Managers' Index (PMI) from Markit Economics - the official indicator of Chinese levels of production - showed a figure of less than 50 for much of the year so far, indicating a period of decline in total manufacturing output from the start of the year until July.

In recent months, there has been a rally in the PMI data. However, September's figure of 50.1 only showed a marginal level of growth and did little to offset losses witnessed earlier in the year.

Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, stated: "The readings for the manufacturing PMI over the past three months seem to indicate that the economy has begun to stabilise.

"But given that the growth rate of fiscal income has slowed recently while expenditures have swung, there is insufficient momentum to drive future economic growth, and there is a risk that industrial output may decline."


Fallout from China slowdown


China remains the world's second-largest economy and therefore the lacklustre nature of its manufacturing sector performance in recent months has created something of a headache for analysts.

At the same time, markets continue to hedge against ongoing instability in Chinese data and it is a situation that many expect to continue for the foreseeable future.

The UK and China hope to build stronger links in the coming years and therefore paying close attention to the relative strengths and weaknesses of the Chinese economy will be essential to creating a more positive and complementary partnership in future.

It is not all negative news from the Asian nation though, as the latest Chinese consumer price inflation report is scheduled to be published this Friday and has been forecast to show growth of up to 1.6% in consumer prices across the country.

Meanwhile, producer costs are forecast to have fallen by up to 0.3%, with the combination of these factors helping to improve the outlook for overall levels of prosperity in China in the months ahead.

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