US investment Bank Goldman Sachs has warned that China remains a key risk for the global economy in 2017. According to the bank, there were serious growth concerns in the short term in 2016, however, policymakers identified the risks and launched fresh stimulatory actions earlier in the year, which helped the economy stabilize in the near term. But the policies that refueled growth in the near term raised broader concerns over the longer run, especially with regard to the debt mountain brewing in China. Total credit growth adjusted for muni bond issuance accelerated from 13 percent y/y in the first quarter of 2015 to 17 percent y/y as of second quarter of 2016 and to 20 percent y/y when including shadow lending not captured in official statistics. The credit problem in China has exacerbated in the past year. The investment bank expects a further rout in the yuan, which has declined against the dollar by almost 7 percent this year as the capital outflow pressures remain.

The investment bank forecasts that the GDP growth would decelerate to 5.5 percent in the first quarter of the next year and forecasts that the yuan would decline to 7 per dollar, 7.15 per dollar and 7.3 per dollar over next 3, 6 and 12 months respectively. The yuan currently trades at 6.95 per dollar.