Chinese economic growth accelerates in Q4 2017, likely to trend down in 2018

The Chinese economic growth accelerated in the fourth quarter, coming in above market expectations. The GDP grew 6.8 percent year-on-year, as compared with the market projections of 6.7 percent. For the whole of 2017, the economy grew 6.9 percent year-on-year, as compared with the official target of 6.5 percent. The figure affirmed that the current momentum of China is solid, owing to the strong domestic and external demand. Last year marked the first year of GDP growth acceleration since 2010. According to a Nordea Bank research report, the positive sentiment is expected to continue at the start of this year but the cyclical rebound would likely run out of steam later. The economy is expected to expand 6.3 percent this year.

Almost all sectors have been tailwinds to the economic growth in 2017, particularly the housing market. Construction building starts have grown by over 10 percent year-on-year, the highest rate since 2012. As the most significant sector of the Chinese economy, it was responsible for raising demand for both the manufacturing and service sectors. But the housing market would unlikely be a main growth driver for the whole of this year as confidence has begun turning less positive, noted Nordea Bank. Tighter housing policy since 2016 has decelerated growth in housing prices and sales.

Other than the manufacturing and service sectors, household consumption has also benefitted from the housing rebound through the wealth effect. In spite of the retail sales growth decelerating in December, the full-year consumption picture was bright. Consumption added nearly 59 percent to growth last year, noted official statement.

Moreover, external factor has been favorable. Owing to the synchronized global rebound in 2017, Chinese exports rose by double digits rate. Net exports added to growth for the first time in many years.

“Looking at this year and the next, we expect GDP growth to continue trending down”, added Nordea Bank.

At 12:00 GMT the FxWirePro's Hourly Strength Index of Chinese Yuan was neutral -16.4027, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -76.7533. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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