The latest data suggests that the economy is starting to show more signs of slowing down. Industrial activity is being hit by the government’s anti-pollution policies, weaker exports and a cooling property market. Fixed-asset investment growth slowed to 7.3% y/y in the January-October period, while private sector fixed-asset investment rose 5.8% January-October. Industrial output grew 6.2% y/y in October and retail sales up 10.0% y/y in October.

Despite signs of slowing down, we believe China’s infrastructure spending will offset the drag. But the impact from infrastructure could be limited since the local governments are reducing their spending in the final months of the year to meet their budget targets. While we project the GDP would expand by 6.7% for the full year of 2017, we expect a moderate GDP growth of 6.4% in 2018.

• Fixed-asset investment growth slowed to 7.3% y/y in the January-October period. Meanwhile, private sector fixed-asset investment rose 5.8% in January-October. Industrial output grew 6.2% y/y in October after increasing 6.6% y/y in September. Retail sales climbed 10.0% y/y in October after September's 10.3% y/y gain.

• The economy performed strongly by expanding 6.9% y/y in the first nine months of this year, underpinned by a recovery in its manufacturing and industrial sectors thanks to a government-led infrastructure spending spree, a resilient property market and unexpected strength in exports.

• But property and construction activities, two of the economy's main growth drivers, are starting to slow due to higher borrowing costs and government measures to cool a heated housing market and curb industrial pollution.

• The latest data suggests that the economy is starting to show more signs of slowing down. Industrial activity is being hit by the government’s anti-pollution policies, weaker exports and a cooling property market. But we expect infrastructure spending to offset the drag on growth in these areas. However, the support from infrastructure is also limited since the local governments are reducing their spending in the final months of the year to meet their budget targets. While we project the GDP would expand by 6.7% for the full year of 2017, we expect the growth to moderate in 2018 to 6.4%.

Source: AmInvest Research - 15 Nov 2017