What's going on?

Economic data out of China on Tuesday showed that the country�s economy did better than expected in August. It�s a welcome relief for investors who thought the economy might slow down as the effects of the recent government-led boost wear off.

What does this mean?

There was good news concerning both China�s �old� economy (e.g. heavy manufacturing) as well as its �services,� which is the part of the economy that the government is trying to prioritize for the future. Industrial production, which is a measure of manufacturing activity, rose the most in five months, and personal shopping figures were strong relative to recent months (which pertain to a �service�). The news shows that China�s economy is probably growing at about the same pace it was earlier this year (when the government-led boost was most aggressive).

Why should I care?

For the market: Too soon to call this a sustained turnaround.
China�s government did a lot of work to encourage economic growth earlier this year (e.g. by boosting spending and encouraging banks to lend to companies). That seems to have paid off, but the question is what will happen next year. Many economists expect economic growth to slow without further government efforts to stimulate the economy.


The bigger picture: China is no longer dragging down global markets.
Concerns over China last year and early this year created a big drag on markets globally, but fears of a Chinese-led global economic slowdown have not materialized (so far, at least). If China is able to sustainably boost its growth rate, that�s probably very good news for global investors. Even if it isn�t able to, more government support could continue to keep China from negatively impacting global financial markets � at least until those policies run out of effectiveness (the timing of which is, to say the least, unclear).