FTCR China Business Activity Index ticks up in December

December 30, 2016

by: FT Confidential Research

The FTCR China Business Activity Index (BAI) — a composite reading of the month-on-month change in activity in the real estate, export and freight sectors — rose slightly in December from the previous month’s 10-month low.

The index rose to 49.2 from 47.8, above last December’s 48 but below the average 50.8 recorded over the past 12 months. This is the first time a December reading of the headline index has shown a sequential improvement since we began our survey in 2012.

Two of the index’s three components improved in December. Our Export Index rose to 56.3 from 54.6, suggesting a sixth straight month of improving conditions, while our Real Estate Index ticked up to 43.2 from 38.9.

Our Freight Index dropped to 52.5 from 53.6 but remained in expansionary territory for a fourth straight month and was comfortably above the average recorded over the previous 12 months.

This was the fifth month in 2016 that the BAI has been below the 50 mark that separates expansion from contraction, with real estate again the swing factor. Improving freight and export sector readings in recent months have not been enough to counter the significant drag created by the housing market’s downturn in the wake of central and local government efforts to rein in speculative excess.

November’s rise in mortgage lending suggests moves to rein in the market have had variable success so far.

However, official rhetoric indicates the clampdown on the housing market will continue into 2017: the leadership recently concluded its annual meeting to outline policy priorities for the coming year and renewed its pledge to “curb asset bubbles”, stating that “a house is for living in, not for speculation”.

The FTCR China Business Activity Index is a composite reading of business activity and sentiment based on our surveys of companies in the real estate, exports and freight sectors. For individual survey methodologies, click here.

A full set of survey results can be found on our database.

FT Confidential Research is an independent research service from the Financial Times, providing in-depth analysis of and statistical insight into China and Southeast Asia. Our team of researchers in these key markets combine findings from our proprietary surveys with on-the-ground research to provide predictive analysis for investors.