Chinese economic growth contributes positively to global outlook

The economic growth of China has continued to be strong, contributing positively to the global outlook. The largest near-term risk is related to the policy tightening in the financial sector. The change in the Chinese yuan fixing mechanism raises questions.

Several analysts believe that the Chinese economic growth accelerated in 2016 even more than showed by the official GDP data. Monthly indicators are pointing towards a direction that strong growth has continued and slowdown so far has been moderate. The biggest near-term risk on growth outlook comes from the tightening of the policy in the financial sector, noted Nordea Bank.

The rapid economic growth of China has considerably contributed to the improved global outlook. Several nations have advanced from solid export growth to China. China’s authorities appear to be determined to decelerate growth in the financial sector. However, the simultaneous aim of the authorities to keep financial conditions in the real economic sector loose becomes difficult as the rise in short-term market rates has spread to for instance corporate bond market. Therefore, even if the policy actions are necessary from the long-term perspective, they cause a risk of slowdown in the near-term, added Nordea Bank.