China: Real GDP growth to slow modestly later this year and into 2018 - Wells Fargo

Analysts from Wells Fargo, point out that growth has stabilized over the past two years in China and they look for real GDP growth to slow modestly later this year and into 2018.

Key Quotes: 

“Volatility rose sharply in many financial markets in early 2016 as investors fretted that growth in the Chinese economy was slowing sharply. Fast forward six quarters, and Chinese economic growth has actually been remarkably stable between 6.5 percent and 7.0 percent over that period.”

“Chinese authorities generally do not hesitate to tweak macroeconomic policies to prevent the economy from slowing too sharply. The government “encouraged” stronger credit growth last year when the economy needed an extra boost, and it appears that policymakers are now attempting to tamp down credit growth so as not to inflate a housing bubble.”

“We forecast that real GDP growth in China will slow somewhat in 2018 relative to the rate that likely will be achieved this year. Although there is justified concern about the amount of financial leverage in the NFC sector, we believe that the Chinese government should generally be able to manage any NPL issues that may arise in the banking system in the foreseeable future. But China also faces some fundamental issues that likely will lead to even slower economic growth in the next decade. Not only will the working-age population in China decline in coming years, but the build-up in leverage in the NFC sector likely will constrain growth in capital spending.”