Economists See China Entering L-shaped Recovery After Rail Freight Surge

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Following a recent surge in China’s railway freight volumes, economic experts expect the country to plateau its way into L-shaped growth recovery.

The latest data from China Railway indicates that the nation’s freight dispatch volume posted a year-on-year surge of 16.3% in March, hitting a total volume of 254 million tonnes.

The railway freight volume figure is just one of a slew of indices just released by Chinese authorities, including PPI and CPI data, which some economists see as presaging first-quarter economic recovery.

Data released earlier this week by China’s National Bureau of Statistics indicates that February CPI rose by 0.8% compared to the same peril last year, while PPI gained 7.8%.

Figures from the National and Development Reform Commission further indicate that full social electricity usage grew significantly during January-February period of this year, rising 6.3% year-on-year to extend growth rates by 4.3 percentage points.

Li Chao, chief macroeconomic researcher with Huatai Securities, said that first quarter year-on-year GDP growth would likely reach 6.8%, maintaining the same level as the fourth quarter of last year.

Ren Zeping, chief economist with Founder Securities, said that the latest raft of data indicates that China is transitioning into a new growth cycle.

“The Chinese economy has already entered the horizontal leg of an economic L-shape, when growth will shift gears,” said Ren. “We are now standing at the starting point of a new cycle.”

According to Ren the defining traits of this new growth period will include the tail-end removal of excess production capacity, improvements to export performance, a recovery in manufacturing sector investment, and real estate investment in excess of projections.

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