CDI-Neri Macro Outlook

A monthly insight into the macro-economic environment in China.

March 24, 2018

Growth Targeted at About 6.5%

Prime Minister Keqiang Li announced during a March 5th address to the People’s Congress of Beijing that China’s growth target for 2018 would be about 6.5%, the same as in 2017, when growth reached 6.9%. The yuan will be “basically stable” at a reasonable level, Li also predicted. More local government debt will be cut, but not at the cost of infrastructure. Moreover, reducing financial risk will be key for the regulatory agency, an emphasis further confirmed by new Central Bank governor Gang Yi, who took office after Xiaochuan Zhou’s 13 years of service.

Only three days after the People’s…

December 26, 2017

Narrowing the External Imbalance

Growth remained stable in November, with industrial output up 6.1% y/y. Fixed asset investment excluding agriculture was up 6.3% y/y, up 0.5 pps from October, and up 2.4 pps from its August nadir. However, the current investment growth rate is still lower than investment goods’ price growth rate, indicating that real investment growth is still negative, by -0.2% y/y.

National fiscal revenue fell -1.4% y/y, turning negative for the first time this year. Since current investment strength is mainly government driven, the fall of fiscal revenue will constrain a possible investment rebound. Retail…

February 26, 2017

Indicators Signal Good Prospects

Due to Chinese New Year, many statistics are still not available, making our analytical task more difficult. But one notable policy change is that monetary policy reversed its 2016 loosening trend, and shifted into tightening. We also expect this to be the trend for 2017. M1 rose 14.5% y/y, continuing the declining trend it began in August, decreasing 1 pps per month on average, and rising 20% y/y, after correcting for the New Year’s holiday effect. M2 rose 11.3% y/y, its lowest level since last year.

Loan growth has hit a new low. Chinese yuan loans from financial institutions rose 12.6%…