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QNB Group published today its China Economic Insight 2015. The report examines recent developments and the outlook for the Chinese economy as it continues its shift towards a consumer-led economy.

Real GDP growth is expected to continue slowing from 7.0% in 2015 to 6.4% in 2016 and 6.0% in 2017 as the authorities act to shift to a consumer-led economy

Investment spending is likely to slow further on overcapacity in a number of sectors and as global demand for Chinese exports recovers slowly

The transition to a consumer-led economy may take time to materialise on falling house prices and the risk of deflation

Inflation is expected to ease in 2015 (0.7%) as the weak real estate market lowers rent inflation and falling global food prices lead to low foreign inflation; inflation is expected to recover in 2016-17 to average 1.8%, due to monetary stimulus and higher global commodity prices

The central bank is expected to loosen monetary policy further, which should help lift domestic inflation

Foreign inflation is projected to recover after 2015, in line with the expected recovery in global commodity prices and a weaker Renminbi

 
 

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The current account surplus is expected to widen in 2015 to 3.0% of GDP on lower commodity prices, before narrowing in 2016-17 to 2.0% and 1.8% as global commodity prices recover

We expect a recovery in exports thanks to a more competitive exchange rate against the USD and rising productivity, which would more than offset gains from weak global trade and rising Chinese wages

China’s import bill is dependent on global commodity prices and should fall in 2015, while export prices should be stable and helped by a moderate recovery in global demand

Deposit growth is likely to slow in 2015 to 8.2% as the economy cools and inflation falls, before recovering in 2016-17 as caps on the deposit rate are removed and inflation rises

Bank lending (9.8%) is expected to outpace deposits as restrictions on shadow banking boost lending in the regulated sector, looser monetary policy is implemented and Chinese savings leak abroad in search of higher yields

Profitability may be negatively impacted as NPLs and provisioning rise with the slowing economy and as profits may be squeezed by narrower net interest margins due to the relaxation of the ceiling on deposit rates and the opening of the banking sector to competition.

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Other recent QNB Economic Insight reports include India, Indonesia, Jordan, Kingdom of Saudi Arabia, Kuwait, Oman, Qatar and the UAE, and are available on the QNB Group website. QNB Group operates in more than 27 countries across 3 continents and its economic reports leverage its knowledge of these markets to provided added value for its clients and counterparties.
 

 


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