China's 2017 GDP likely to fall to 6.3 pct as credit growth slows, says Fitch Ratings

The Chinese economy is expected to growth at around 6.3 percent this year, a downward adjustment of 0.1 percentage point since the November 2016 GEO, following slowdown in the country’s credit growth. The possibility of punitive trade restrictions under the Trump administration is a key downside risk, Fitch Ratings reported.

China’s economy grew slightly faster than anticipated in 4Q16 at 6.8 percent as the impact of earlier stimulus measures proved effective and consumer and service sector growth remained robust.

Growth in 2016 as a whole was slightly faster than the government’s target at 6.7 percent. GDP has expanded at an annual average rate of 7.7 percent since 2010 and would need to grow at 6.4 percent per annum over the next four years to hit the authorities’ objective of doubling real GDP by 2020.

The recent stabilization in growth has seen policy makers’ focus shift to curbing the growth of leverage. Regulators have been tightening macro prudential controls on banks’ shadow funding activities since late 2016 and this has, alongside the hike in Fed rates and continuing large-scale capital outflows, resulted in a tightening in domestic money market liquidity.

"The People’s Bank of China has increased a number of key money-market interest rates, and we no longer expect any further cuts in the official policy lending rate this year. House purchase restrictions have also been rolled out on a much wider basis across the country," the report commented.