Chine: Moderate slowdown over the next year due to financial tightening and measures to cool housing - Danske Bank
|Analysts from Danske Bank look for a slowdown in the Chinese economy but they don’t expect it to turn into a hard landing.
Key Quotes:
“We look for a moderate slowdown in China over the next year due to financial tightening and measures to cool housing. We forecast GDP growth to be 6.8% in 2017 and to fall to 6.3% in 2018. A hard landing is not likely, though, as residential inventories are low and exports are supported by robust global growth.”
“We believe the 19th Party Congress will lead the way for more implementation of economic reforms. Inefficient indebted SOE's and overcapacity is at the core of the problem.”
“We expect more steps to contain financial risks over the next year, but it will likely continue in a ‘two steps forward - one step back’ fashion. China's rebalancing is progressing but too slowly in our view. The economy is still too dependent on construction and infrastructure investments. This could eventually lead to a crisis but it is not likely to happen in the next few years.”
“While we look for a slowdown, it should not turn into a hard landing. First, the global economy is in a good shape, fostering robust growth for Chinese exports. Second, housing inventories are quite low after a period of very strong home sales. The picture is still very diverse as especially in the big cities there is a scarcity of housing, whereas inventories are higher in tier-3 and tier-4 cities.”
“While China still has a long way to go to make the SOEs more efficient, the fight of corruption, continued technological upgrading, focus on innovation and education of the Chinese workforce are in our view more critical in driving China’s economy forward in the years ahead.”
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