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China will release its gross domestic product (GDP) figure for the last quarter of 2016 and fiscal year 2016 (FY16) on Friday. We expect that the world’s second-largest economy will maintain its economic growth at 6.7 percent y/y, similar to all three-quarters of 2016, while remaining within the government’s target range of 6.5-7 percent.
Consumption continues to play an important role in stabilising the mainland economy. Retail sales are projected to grow more than 10.5 percent in the fourth quarter. High-frequency data such as foot traffic at shopping centres and restaurants increased in December on a month-on-month basis. Year-end auto sales also appeared brisk, reported DBS Group Research.
Chinese shoppers are helping the economy transited away from over-reliance on investment-led growth. Indeed, consumption’s contribution to GDP growth has risen from 48 percent in 2013 to 76 percent in the first three-quarters of 2016. While industrial production and fixed asset investment (FAI) still hovered around multi-year lows, leading indicators include PMI and electricity production suggest that the country’s traditional sectors ended the year on a more solid footing, they added.
The DBS in its research note mentioned that against this backdrop, growth in China is expected to be stable into early 2017, barring a realisation of restrictive trade policies under a Trump presidency. The US president-elect’s appointment of Peter Navarro (a strident China critic) as head of a newly created National Trade Council and Robert Lighthizer as US Trade Representative suggests a very hawkish trade policy towards China.
