China: Upward trend in GDP numbers – Wells Fargo

Chinese GDP grew 6.9 percent on a year-ago basis in Q1 2017, slightly beating the consensus forecast which called for 6.8 percent, explains the analysis team at Wells Fargo.

Key Quotes

“Over the past three quarters, Chinese GDP has grown 6.7 percent, 6.8 percent and 6.9 percent, representing an upward trend that has reversed the previous gradual slide in GDP growth rates.”

“Growth in the secondary industry, which includes mining/quarrying, manufacturing, construction and utilities production, rose to 6.4 percent year over year. The secondary industry accounts for roughly 40 percent of the value added in the Chinese economy. Growth in the primary industry, which includes agriculture, forestry and fishing slowed to 3.0 percent in Q1 from 3.3 percent in Q4.”

“Strength in the secondary sector can partially be attributed to a rebound in overall investment spending, which increased 8.9 percent in May. Investment in the Chinese housing market has shown a similar rebound, growing 9.3 percent in April of this year.”

“In January of this year, China’s FX reserves dipped below $3 trillion for the first time since early 2011. However, concerns have started to dissipate after FX reserves reversed their outflows and increased in every month since February, albeit at a very modest rate. Moreover, against the backdrop of a Fed that is in the midst of tightening rates, our currency strategy team expects the Chinese renminbi to depreciate, modestly, against the U.S. dollar.”

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