The Chinese economy performed remarkably despite widespread concerns about financial risks and debt restructuring amid a government-led economic restructuring. The 4Q2017 GDP grew at the same pace as 3Q2017 i.e. by 6.8% y/y, bringing the full-year GDP to 6.9% y/y, marginally higher than our projection of 6.8% y/y, and surpassing the official projection of 6.5%. It is an improvement from 2016’s 6.7% which is the lowest in 26 years.

We project 2018 GDP at 6.4%, slightly lower than consensus’ 6.5%. Though resilient external demand and solid domestic household consumption will support the growth, the economic transformation will continue to act as a drag given that the impact from the new economy is not strong enough to offset the still-dominant old economy sectors. And rebalancing away from investment with tighter monetary and policies to ease financial risks will slow down investment i.e. in real estate investment although inventories are low and hence will prevent the sector from a sharp slowdown.

• The Chinese economy performed remarkably despite widespread concerns about financial risks and debt restructuring amid a government-led economic restructuring. The 4Q2017 GDP grew at the same pace as in 3Q2017 i.e. by 6.8% y/y, bringing the full-year growth to 6.9% y/y which is marginally higher than our projection of 6.8% y/y, and surpassing the official projection of 6.5%. It is an improvement from 2016’s 6.7% which is the lowest in 26 years.

• While the heavy industries and property-linked sectors, which part of the old economy, are deliberately slowing, there are other parts of the economy defined as new economy that includes services, parts of the manufacturing sector, ecommerce, online financial services and high tech industries which are showing strength.

• We project the 2018 GDP at 6.4%, slightly lower than consensus’ 6.5%. Though resilient external demand and solid domestic household consumption will support the growth, the economic transformation will continue to act as a drag given that the impact from the new economy is not strong enough to offset the still-dominant old economy sectors.

• And rebalancing away from investment with tighter monetary and policies to ease financial risks will slow down investment i.e. in real estate investment although inventories are low and hence will prevent the sector from a sharp slowdown.

Source: AmInvest Research - 19 Jan 2018