From Morgan Stanley on a trip to China:
General economy. GDP growth target of 6.5% for 2016 and on average for the 13th planning period 2016- 2020 is driven by the objective to double GDP per capita by 2020. It will require more monetary and fiscal stimulus to achieve that with room available to deliver both.
Residential construction cycle. This remains the area with the most uncertainty. The arguments for a return to some YoY growth in housing starts in 2016 remain the de-stocking that is taking place combined with the recovery in house prices plus the measures to reduce finance costs for both developers and consumers. The arguments against are high inventory levels outside tier 1 and 2 cities, the change in China’s demographics from 2017/2018 onwards, limited profitability of developers and reduced availability of financing. On average speakers hoped for a YoY increase in 2016 housing starts but with low levels of conviction.
