FXStreet (Delhi) – Prakash Sakpal, Economist at ING, suggests that with persistent real estate correction we consider our 7% forecast for GDP growth in 4Q subject to more downside than upside risk. Key Quotes “A 5-month high industrial production growth, the Singles Day boost to retail sales, a bounce in new loans and aggregate financing, and acceleration in infrastructure investment growth were the highlights of the November activity data release over the weekend.” “The IP bounce by 6.2% YoY and 0.58% MoMSA despite signals of persistent weakness from manufacturing PMI and exports. Growth is up from 5.6% and 0.48% respectively in October and the fastest since June. The average IP growth in the first two months of this quarter, 5.9% YoY, was unchanged from that in 3Q. We need few more months of strong IP data to change our view that pending additional policy stimulus (via stimulus to the housing sector) the 5-6% range for IP growth prevails.” “Retail sales growth accelerated to 11.2% YoY in November from 11.0% in October, thanks to the record singles day sales. This puts year-to-data retail sales growth at 10.6% YoY, of which 2.9ppt was from the online sales.” “We read the November activity data as signalling some stabilization of the economy. However, with persistent real estate correction we consider our 7% forecast for GDP growth in 4Q subject to more downside than upside risk.” “The firmer activity data is expected to reduce the CNY depreciation pressure after it intensified on Friday following the PBOC’s move of linking the CNY to a basket of currencies from just the USD. The China Foreign Exchange Trade System (CFETS) started publishing a new CNY index against a basket of 13 currencies.” “The statement on the PBOC’s website described the moves as aimed at “bringing about a shift in how the public and the market observe RMB exchange rate movements”. It noted “… as fluctuations of exchange rate serve to adjust trade and investment activities with multiple trading partners, the bilateral RMB-USD exchange rate is not considered a good indicator of the international parity of tradable goods”. Our end-2016 USDCNY forecast is 6.55 (latest 6.46, Bloomberg median 6.60, NDF 6.78).” For more information, read our latest forex news.