The FTCR China Business Activity Index (BAI) — a composite reading of the monthly change in activity in the real estate, export and freight sectors — hit a three-year high in September.

The index rose to 59.4 from 51.6 in August, far above the 53.8 recorded last September as well as the historical average of 52.3. September’s was the strongest monthly reading since the 61.2 recorded in September 2013.

Although the change in the headline index was largely the result of a 10.6-point jump in our Real Estate Index to 71.5, this was also the first month since November 2014 that all three components of the BAI were above 50. The FTCR China Freight Index rose to 50.6, its highest level in nine months, while our China Export Index hit a 10-month high of 55.

The BAI for September belies any talk of a near-term Chinese hard landing but again underscores the importance of frothy housing markets in propping up headline growth. Our measures of freight and export conditions do indicate improvements in these sectors relative to August, but they have only recovered to roughly historical average levels.

The future direction of the BAI — and of the Chinese economy — will hinge on the property market. As local officials struggle to contain speculative excess, particularly in big markets, pressure will grow on the central government to act to moderate activity. It is, once again, faced with the problem of containing the animal spirits that are driving outsized gains in house prices without severely weakening a key driver of economic growth.

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.

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