China: Growth holds steady but slowdown expected - Wells Fargo
|Analysts at Wells Fargo, explained that real GDP growth in China was 6.8% y/y in Q1, the third consecutive print of this magnitude. They noted that a deceleration in investment spending “presages a gradual slowdown in economic growth in the coming quarters.”
Key Quotes:
“Real GDP growth in China met expectations for Q1-2018, matching the Bloomberg consensus forecast of 6.8 percent year over year. Economic growth in China has been remarkably stable over the past couple of years as policymakers have worked to engineer a “soft landing” as the economy enters a more mature phase of its development”.
“Retail sales growth rebounded strongly in Q1 after hitting a mild soft patch to end Q4-2017. In the press release from the National Bureau of Statistics of China, the agency noted an acceleration in services output in March, suggesting solid momentum heading into Q2. However, investment spending and industrial production both decelerated in March. In part, this reflects a conscious effort by Chinese policymakers to shift the economy towards a more consumption oriented model of growth. Trade also likely contributed to growth in Q1.”
“On balance, today’s report reaffirms our outlook for the Chinese economy. Economic growth remains firm, boosted by the cyclical-upturn in the global economy. However, we believe structural factors will continue to weigh on economic growth over time. Decelerating investment spending and an aging population are the ingredients for slowing potential growth. In addition, Chinese policymakers recognize the possible threat from high leverage in the nonfinancial corporate sector and have taken steps to slow credit growth.”
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