China: Growth on the up for now - Westpac

Research Team at Westpac notes that the momentum in the Chinese economy picked up through 2016, boosted by expansionary fiscal policy and ongoing strong growth in credit.

Key Quotes

“Property construction rebounded, and growth in publicly-financed infrastructure spending remained strong. Meanwhile, growth in the services sector has remained relatively stable, as improving employment prospects and a turnaround in the housing market have led to better conditions for the household sector. In addition to the growing middle class, a better backdrop for Chinese households will support demand for New Zealand’s consumer-orientated exports.”

“GDP growth is expected to hold up at 6.6% this year, as the Chinese authorities will be keen to maintain a strong economy in the lead up to the National Congress in November. But growth is forecast to step down to 6% in 2018 as fiscal stimulus is pared back, while private investment hasn’t shown any signs yet of strengthening to fill the gap. The global trade environment presents risks for the Chinese economy, as any large tariff or Border Tax would pressure China’s foreign reserves and growth outlook. That said, the rising share of services over time means that China is not as reliant on trade as it was a decade ago.”