A good start but what’s in store for China’s economy in 2018?
Early indicators point to strong growth but will it give Beijing the strength to take on debt?
China got off to a promising start to the year, with the yuan strengthening to a 20-month high against the US dollar and Shanghai stocks gaining nearly 3 per cent in the first week of 2018.
The first indicators of the year, the purchasing managers indices, also pointed to faster growth in economic activity. A slew of other results over the next few days are expected to reflect strong growth.
Optimism about the year ahead, albeit cautious, is gaining ground but there are persistent worries about China’s debt mountain and the threat of trade disputes with the United States and Europe.
Gavekal head of research Arthur Kroeber said talk of China risking a “Japan-style lost decade” of economic stagnation was banished after Beijing engineered a property and infrastructure stimulus last year.
“This credit-fuelled surge raised predictable worries that China was flirting with financial meltdown. But impressively, Beijing spent most of 2017 cracking down on financial risk, sharply cutting the growth in shadow lending – with zero impact on economic growth,” Kroeber wrote in an article published on Friday.
Kroeber said it was his bet that China could easily maintain growth while containing financial risk for at least one more year.