China’s stimulus-driven recovery is over. Key risks, in particular around the currency, have dissipated, so the coming slowdown should be mild. But the economy’s structural problems are not being addressed. Prospects for growth further ahead are therefore increasingly poor.
Policy support led to a sharp rebound in growth in 2016. By the turn of this year, it had hit nearly 7% on our estimates, well above China’s sustainable rate, which we believe is currently closer to 5%. As such, a slowdown was always on the cards for 2017, particularly with the shift to policy tightening. Recent data suggest that this slowdown is now underway.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
