China's economic growth is expected to be unchanged in the fourth quarter of this year, but an improvement is still distant due to property weakness and excess capacity, according to the latest report from UBS.
The Swiss banking group expect Q4 growth of 6.9 percent year on year, level with the third quarter, bringing 2015 growth to between 6.9 percent and 7 percent.
"November's data release confirms that China's real economy is stabilizing tentatively at low levels, but the continued worsening of property volume construction activity means that we are far from seeing a fundamentals-driven rebound," said the report.
China's November data surprised on the upside, with better infrastructure investment, steady consumption and industrial production up more than expected, it said.
Infrastructure investment jumped by 18.2 percent year on year in the first 11 months of 2015, 0.8 percentage points higher than the Jan.-Oct. period, official figures show.
Retail sales, a key indicator of consumer spending, rose 11.2 percent year on year in November, the highest monthly growth rate of the year. Value-added industrial output grew 6.2 percent in November, picking up from 5.6-percent in October.
However, property construction lessened, as did real estate investment. Real estate investment rose just 1.3 percent year on year in the first 11 months, compared with 2-percent growth in the Jan.-Oct. period.
Corporate investment demand remained weak, said the UBS report.
Supportive policy will only partially offset a weakening property market and excess capacity throughout 2016, as tax cuts for small firms and increased spending on social welfare will take longer to show results, it said.
UBS expects further monetary easing, with two more interest rate cuts early in 2016 and another cut of the reserve requirement ratio by 300 basis points next year.
China's economy will stabilize on a more sustainable basis only after property construction stops sliding and more progress has been made in reducing capacity and closing nonviable enterprises, according to the report.
