A raft of data from China in coming weeks is expected to show the world’s second-largest economy carried solid momentum into 2017, thanks to heavy government stimulus and a construction boom that breathed new life into its ailing smokestack industries.
Threats of capital flight and a strong bias in the currency market for weaker yuan are creating further headaches for the government, even as US President-elect Donald Trump threatens to brand China a currency manipulator and impose heavy tariffs on Chinese goods.
China is due to report fourth-quarter and full-year gross domestic product on January 20. Gross Domestic Product might have accelerated in 4Q after growing at exactly 6.7% for each of the first three quarters, smack in the middle of the government’s 2016 target range of 6.5% to 7%.
However, despite signs of economic stabilization and even improvement this year, money has been leaving China on the back of the yuan’s steady decline against the surging US dollar.
The extent to which authorities have battled to stabilise the yuan may be seen in foreign exchange reserve data on January 7.
China’s foreign exchange reserves likely fell to US$3 trillion in December, from US$3.052 trillion at the end of November and the lowest since April 2011, according to median estimates from analysts surveyed by Reuters.
In recent weeks, the government has stepped up oversight of individual foreign exchange purchases and outbound investments by companies, saying it wants to close loopholes for speculative outflows.
Trade and inflation
Trade and inflation data will follow on January 10 and January 13, respectively. Fourth-quarter GDP and December fixed asset investment, retail sales and industrial output are out on January 20. Loan and money data is expected anytime between January 10 and January 15.
Analysts expect shipments in dollar terms from the world’s largest exporter declined 3.5% in December, compared with a 0.1% increase in the previous month, while imports likely rose 2.4%, down from 6.7% growth.
Inflation will also be on the radar in 2017, with any sign that consumer price increases are accelerating the chances of policy tightening, which could throw a wrench into an economy still driven by rapid credit growth and property boom.
Fuelled largely by stronger demand and higher prices for building materials and coal, China’s producer prices likely rose 4.5% in December, which would be the fastest since November 2011.
Consumer prices likely rose 2.3% in December, the same pace as in November. Analysts say policymakers are not likely to worry much about inflation unless the consumer price index rises above 3%.
Highlighting how much money was pumped into the economy last year, banks are expected to have extended a record amount of credit, despite signs that the country’s leaders are worried about the risks of prolonged debt-fuelled stimulus.
Lending and bad debt
Banks probably extended 700 billion yuan (US$101.73 billion) in new loans in December, down from the previous month but still easily putting the 2016 total over the 2015 record of 11.72 trillion yuan.
The growth rate of outstanding loans likely held steady at 13.1% year on year, while M2 money supply expanded at a slightly stronger pace of 11.5%.
Industrial output and retail sales probably grew 6.1% and 10.7%, respectively, easing marginally from November, while fixed asset investment growth was likely steady at 8.3%.
Industrial output likely dipped as authorities closed some factories to battle heavy smog in northern China, and as government attempts to control red-hot property prices have slowed the pace of new home construction and investment.