Trusting our 15 years experience about China, we never thought otherwise. National Bureau of Statistics has today announced that the economy had grown by 6,7% in 2016, meeting the governments’ target of 6,5-7%. This is the lowest level since 1990, when the economic effects of student protests a year earlier, which reached its’ climax at Tiananmen Square, were felt.
Looking at the details of GDP numbers, we can see that tertiary sector (services) and conumption expenditures continued to be the main engines of growth. On the other hand, the contribution of investment to overall growth figure kept declining, albeit marginally, while net exports made a negative contribution, for the sixth time in the last 8 years.
At the final three months of 2016, the GDP growth came at 6,8%, a slight improvement over 6,7%, which was the growth rate of the first three quarters. We have already expressed our expectations about a small improvement of growth, after the release of December PMI data. However, we see this improvement as a small uptick, rather than a broad-based turn around in Chinese economy. Meanwhile, we have to note that the lack of upwards revisions on market forecasts, after the PMI data, is quite interesting.
This week also saw the announement of December monthly figures. While industrial production and fixed asset investment (FAI) decreased marginally, retail sales beat market expectations. Other details set aside, we note that private sector FAI continued its’ gradual recovery, a factor which we see as an upside risk for 2017.
Housing data was another important release this week. Yearly increase in prices seems to have peaked in December, after reaching double digits in September and causing the authorities to unleash a fresh round of measures. Meanwhile, the increase in housing sales is slowing down, while growth in investments move sideways. To be honest, we haven’t analysed the latest trends in housing prices yet, thus we opt for looking over the housing sector for today. Anyways, the markets also fail to reach a clear idea about the sector: BNP expects a recovery in H1 2017, while Deutsche Bank foresees a weakening. Given the neat cyclical nature of housing prices, we can at least expect a slowing trend in yoy housing prices, for the first half of 2017.
We have left 2016 behind us… What will happen in 2017. Only one thing is for sure, the government will be doing its’ best to keep economy on track, before the big Communist Party meeting in 2017. In fact, the Central Economy Conference in late December has set containing risks under control, financial risks particularly, as one of primary policy objectives. As we have shown earlier, these risks are building up one another this time and simultaneuosly dealing with them will be really difficult. Still, we don’t expect a major crisis during year 2017 (only few does). On the other hand, our growth expectations will be the -0,1/+0,2 ppt range around the official target, which will be announced in early March.
*: NBS has only announced the figure for tertiary industry, so we have polarised 2015 numbers for primary and secondary industries.