S&P raises China’s growth forecast following stronger-than-expected GDP

S&P Global Ratings, a rating agency, Monday raised forecasts for the growth of Chinese economy in 2016 and 2017, following the upbeat gross-domestic product that sparked the economy during the second quarter of 2016.

The global ratings agency has forecast China’s real GDP expanding 6.6 percent this year and 6.3 percent next year, both about 0.25 percentage points higher than the previous forecasts. The agency’s 2018 GDP growth forecast remains at 6.0 percent.

"Our higher growth forecasts don't mean that we think the health of the Chinese economy has improved. Instead, it shows we overestimated the authorities' appetite for slower GDP growth as the price for improving medium-term financial sustainability," said Paul Gruenwald, Asia-Pacific Chief Economist, S&P Global Ratings.

Further, the agency has mentioned that the current trajectory of the economy is unsustainable, given that credit growth has been running at about twice the pace of nominal GDP growth.

"While we gauge the risk of a near-term correction in China as relatively low, these risks will continue to rise over time if the credit-heavy pattern of GDP growth is not corrected," added Gruenwald.