(Bloomberg) — For Janet Yellen, what a difference two months can make.
When the Federal Reserve in September held off from its first interest-rate increase since 2006, Yellen cited growing concerns about China’s market turmoil among the reasons. “A lot of our focus has been on risks around China,” she said in a press conference after the decision.
At the time, China’s leaders were struggling to contain the fallout from a $5 trillion stock market rout and an abrupt decision to devalue the yuan that sparked a flood of capital to leave the country. The turmoil rattled global investors and emerging markets amid concern China would spark another step down for world growth.
That was then.
Now, while Chinese economic indicators are mixed, its markets have calmed. The Shanghai stock market has gone from bear to bull. Capital-flow worries have eased, and the yuan has advanced more than 1 percent from a four-year low in August.
The exchange-rate gains have helped soothe worries that China was embarking on a competitive devaluation to boost its flagging exports, as part of a broader effort to meet a growth target of about 7 percent for the year.
“The risks stemming from China’s outlook as perceived by Yellen and the Fed have definitely gone down in the last two months,” said Louis Kuijs, head of Asia economics at Oxford Economics in Hong Kong, who used to work at the World Bank.
That offers Yellen and her colleagues some cheer as they prepare for the year’s final meeting, Dec. 15-16 — when a rate rise is potentially a “live possibility,” the Fed chair has said.
It’s not just China’s markets that are stabilizing. On the ground, consumers are defying the slowdown in the industrial part of the economy. Data Wednesday showed retail sales in October grew at their fastest pace this year. Alibaba Group Holding Ltd.’s annual Singles’ Day promotion, a shopping-campaign twist on Valentine’s Day, exceeded the 57.1 billion yuan ($9 billion) 2014 level before midday.
Those gains on the consumption side are crucial as the government looks to ease off a reliance on debt-funded investment and heavy industry.