China: GDP growth slows slightly in Q3 - Wells Fargo
|According to analysts from Wells Fargo, Chinese real GDP growth met expectations in Q3. They explained that the deceleration in fixed investment spending in China continued, however, as a result of both secular and cyclical trends.
Key Quotes:
“Data released today showed the Chinese economy growing 6.8 percent on a year-ago basis in Q3, matching the Bloomberg consensus forecast. The print marks a 0.1 percentage point slowdown from the 6.9 percent pace registered through the first two quarters of the year. Although a breakdown of GDP into its demand components is not yet available, sector level data indicate that growth was largely steady in the key sectors of the Chinese economy.”
“Economic growth in China has firmed in 2017 relative to last year’s pace amid the stronger global growth environment. At present, we expect real global GDP to accelerate about half a percentage point in 2017 from the growth rate registered in 2016. Even with the faster growth at home and abroad, fixed investment spending in China has continued to decelerate. Some of the slowdown has been the continuation of a secular trend; investment spending has decelerated for most of this cycle as the Chinese economy continues the steady transition towards a more consumption-oriented growth model. To that point, retail sales data released today showed continued double-digit year-to-date growth through the month of September.”
“More recently, investment spending growth has continued to slow as Chinese policymakers have moved to tighten policy amid concerns that the credit expansion, that occurred when the economy was slowing, might lead to debt imbalances.”
“At the ongoing 19th Party Congress, the signals from leaders have suggested that policymakers will not move anytime soon to scale back the SOEs. We do not believe the corporate leverage/SOE challenges are likely to cause an implosion in the Chinese economy anytime soon, but they do represent both a downside risk to the outlook and a secular drag on the economy’s potential growth rate. We continue to expect real GDP in China to decelerate modestly in 2018 to a 6.3 percent pace.”
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