Data shows China economy set to slow in 2017, Capital Economics says

Chinese activity continued to recover in the fourth quarter but was set to slow in 2017, economists said, as measures to dampen the real estate sector weighed on the economy.

Official data showed that industrial production was steady in October, rising by 6.1% year-on-year (consensus: 6.2%), the same as in September.

However, Capital Economics's industrial output index, which aggregates figures on volumes for more than 500 individual products, strengthened markedly in October, revealing growth in electricity, steel, glass, and cement all accelerated, the think-tank said in a research report sent to clients.

In parallel, the year-to-date rate of expansion in fixed asset investment increased from 8.2% year-on-year to 8.3% (consensus: 8.3%), with a large part of the recent recovery originating in a marked rebound in private investment, which stagnated earlier in the year.

A sharp rebound in real estate investment drove the improvement, Capital Economic said, but measures recently put in place are already beginning to bite, suggesting the improvement may not last.

Nominal retail sales on the other hand cooled from a 10.7% year-on-year clip in September to 10.0% (consensus: 10.7%), partly as a result of unfavourable base-effects.

Auto sales jumped one year ago after a tax on small vehicles was halved.

Julian Evans-Pritchard, China economist at Capital Economics, expected the economy to hold up well for another quarter or two.

Nonetheless, with credit growth slowing and property market momentum ebbing "the drivers of the recent recovery look set to fizzle out early next year," he said.

Evans-Pritchard added that Trump's election added downside risks to the Asian giant's exports.