China

China maintains the faster pace of growth in Q2 as well

In Q2 2017, China’s economy again grew by 6.9 percent on the year and has thus maintained the slightly brisker pace of growth seen at the beginning of the year. The monthly economic figures for April and May suggested that growth in the prior quarter might have slowed slightly, but in June the economy seems to have become far more zestful. These are good signs for the second half, when growth will probably maintain this momentum. In the run-up to the Communist Party of China’s (CPC) Party Congress in the autumn, which takes place only once every five years, the leadership in Beijing is, among other things, emphasising “stability”. If necessary it will also provide short-term growth stimuli to ensure that economic conditions remain favourable. The Chinese economy is at present also benefiting from the improved global economy. In recent months, foreign trade has supported growth. Given these conditions, we…

China is groaning under the weight of its debt burden – but still shuns reform

China’s debt level has increased dramatically since the financial crisis in 2008/2009 and is now one of the highest worldwide. The inflated housing market, the shadow banking sector which has seen strong growth and numerous state-owned “zombie” companies present considerable risks and render the country vulnerable. Beijing is sustaining a vicious circle of efficiency loss, slowdown in growth and ever-increasing debt. There is a growing risk that these imbalances will culminate in a crisis at some point. However, due to the central government’s immense financial power, a systemic financial crisis should be preventable. Continued low economic growth, on the other hand, seems unavoidable. The International Monetary Fund (IMF) and the Bank for International Settlements (BIS) are above all concerned about the strong momentum behind debt accumulation in China. They draw alarming parallels between its development and that of other countries which have recently experienced a financial crisis, such as Spain…

Strong growth in China – bought with high government debt

China’s economy visibly picked up steam at the beginning of the year. The upturn, which was first tentatively indicated by an improvement in sentiment surveys as of the middle of last year before firming up in countless leading indicators, is now also reflected in better growth figures. Yesterday, Easter Monday, the Chinese statistics office announced that GDP growth in Q1 2017 had been 6.9 percent. In other words, the rate not only topped that of Q4 2016, when growth had been 6.8 percent and had thus already accelerated slightly, but also favourably outperformed market expectations. The differences may be small and would hardly be worth mentioning with regard to other economies. However, for China the announcement of the slightly faster pace of growth is notable. After all, hardly two years have passed since turbulence in the Chinese financial markets sparked major concerns about the Chinese economy’s stability. At the same…

China’s economy picks up somewhat – albeit only temporarily

The Chinese economy appeared astonishingly robust last year. While, at 6.7%, economic growth in 2016 was lower than it has been for a good quarter of a century, it was only slightly down on the previous year’s growth of 6.9 per cent. As a result, the government was easily able to comply with the target range for economic growth introduced a year ago, which currently amounts to between 6.5 and 7%. Over the course of the entire past year, growth seemed to be almost “set in stone”, at 6.7%. According to official figures, it even seems to have accelerated slightly in the final quarter. As the Chinese Office for Statistics announced this morning, GDP growth was a little higher, at 6.8%, in the fourth quarter than in the previous quarters, meaning that it slightly exceeded market expectations. It was also the first time for two years that Beijing announced a…

China’s 3 trillion dollar question

We face the same scenario year after year: the Christmas holidays have only just ended, the New Year hangover is cured and the first resolutions for the New Year thrown overboard, when China attracts attention with alarming headlines. Unlike the doomsday mood of January 2016, the current uncertainty is no more than a storm in a teacup. Rather than being worried about the global implications of a hard economic landing in China, markets are currently more concerned about the lack of success in the relentless battle to stem the outflow of capital. China’s most recent reserves data are rubbing salt in the wounds again this year and bringing China’s intervention policy to the international stage. Even though China’s reserves just about managed to stay above the psychologically important USD 3,000bn mark, the question is how far can they fall before the situation becomes precarious. The ARA (Assessing Reserve Adequacy) is…

Trend reversal on the horizon for emerging markets – positive effect for developed countries

The global economy simply does not want to swing into motion; global trade is stagnating. The central banks are doing what they can to support economic development. Calls are now growing loud for governments to push start the economy through higher public spending. However, in the absence of any perceptible economic recovery in the large emerging markets, the successes of these measures will be short lived. In spite of this, a trend turnaround is slowly emerging in these countries, which should improve the global economic outlook. Economic development in most of the big emerging markets has been anything else but positive in the last two years. The crisis in for example Brazil, Russia and South Africa took its toll on the glowing reputation of the „growth markets“. Even China, which has been the driver of global growth for a long time now, cannot avoid the trend towards consistently lower overall…

1 5 6 7