Chinese economic growth likely to decline in 2017, to lose support from housing sector and monetary policy

The Chinese economic growth is likely to decline in 2017 as it loses support from the housing sector and ultra-easy monetary policy, noted Nordea Bank in a research report. However, no sharp deceleration is expected due to infrastructure investment. In the last few years, the Chinese economy has depended on three factors – the housing market, easy monetary policy and fiscal policy.

It appears that the economy will lose the housing sector and monetary policy support for the rest of 2017. Concerns of a housing bubble and leverage-funded speculation in other areas have overshadowed growth worries. Housing and monetary policies are being tightened by regulators at the same time.

Notably, public infrastructure investment is left as the only stimulus tool. Therefore, the Chinese GDP growth is expected to slow down over the course of 2017. Even if strict capital restrictions have kept outflows in check, they have resulted in record-high policy uncertainties. The lack of sentiment in China’s economic policy might become a major growth risk. Meanwhile, trade-weighted yuan has weakened because of the opportunistic FX policy.