China: Rebalancing priorities

6/22/2017 - Report
ic_blogtagChinaCountry Risk

Country Report

Slowing pace 

The economy started 2017 on a positive note supported by improving exports and supportive macro-policies. Retail sales growth remained firm, industrial production and investment showed some signs of revival. 

Growth is expected to decelerate somewhat towards +6.3% in 2018 (after +6.7% in 2017) as a result of a moderation of credit growth. The central bank and the financial regulator have stepped up measures to contain financial risks namely bubbly property markets, a rise in shadow banking activities and an elevated corporate debt. Fiscal policy will remain expansionary to avert a sharp slowdown. Private consumption would continue to grow at a strong pace driven by continued rise in wages and (still) solid labour market. Risks, on balance, are still elevated. Domestic imbalances (debt and excess capacity, e.g.) prevail and require quick actions from policy makers. External sources of risk stem from fragile trade environment, and uncertain (trade, monetary) policy orientations in the US.  

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