China’s economy and a debt dilemma – NAB

By FXStreet Analysts at National Australian Bank explained that Chinese authorities target marginally slower growth, but are content to let debt position deteriorate.

Key Quotes:

“China’s policy makers met at the National People’s Congress in early March, announcing an economic growth target range of 6.5-7%. In addition, they released a target growth rate for total social financing of ‘around 13%’ – which would result in a further deterioration of debt-to-GDP.

As noted in this month’s China Economic Update, a broader estimate of China’s debt puts this figure at around 308% of GDP – a level comparable to many advanced economies and particularly high for a still developing country. Chinese authorities are now facing a debt dilemma – they can no longer allow debt to grow unchecked, however controlling debt growth would mean accepting a slower rate of economic growth. At least for 2016, they appear content to allow the former to happen.

Industrial production growth slowed to a seven year low in January-February, while fixed asset investment accelerated slightly, on the back of stronger investment in real estate. New construction starts were stronger over this period, but it is too early to know if this is a trend that can be sustained.

Retail sales were a little …read more

Source:: FX Street