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%…

January 28, 2017

Facing the Trade Uncertainties

GDP in 2016 rose 6.7% y/y, down 0.2 pps from 2015, reaching the lowest yearly level in China. The quarterly growth was highly stable, with first three quarters rising 6.7% and the fourth quarter rising 6.8%. In 2016, fixed asset investment rose 8.1%, down 1.9 pps from 2015. From the growth trend, it rose fastest in Q1, and grew 10.7% y/y, higher than Q3 and Q4 in 2015. The other three quarters displayed slower growth rates.

Ended on December 16, 2016, the most important meeting, the central economic workshop meeting, held by Chinese top leaders including the President and Prime Minister,…

December 25, 2016

Stability and Progress Targeted for 2017

The economic working meeting of the Communist Party Central Committee, chaired by President Xi Jinping, has set next year’s main economic goal: stability and progress. The meeting, which ended on December 16th, was the most important political-economic session of yearend. We view progress not in terms of the growth rate, but as focused on structural transformation, and aimed at a more balanced economy.

Fixed asset investment rose 8.3% y/y in real terms in November, up slightly after canceling for incomparable factors. For various industries, a key change is that industrial investment is…