China: Medium-term outlook is a matter of concern – Nordea Markets

Amy Yuan Zhuang, analyst at Nordea Markets, suggests that concerns about Chinese growth have become popular again and they are mostly worried about the medium-term outlook.

Key Quotes

“A bigger challenge for China now is struggling growth. A prolonged period of heightened economic uncertainty has finally hit business and consumer confidence.”

“That is a bigger concern for Beijing as the Chinese economy is much more domestically driven than before.”

“That leaves the authorities with no option but to provide increased stimulus support. Policy initiatives have gone from export rebates and consumption boost to infrastructure investment – an unfailing tool to shore up demand. Monetary conditions have eased and local governments have been allowed to issue more debt to finance these projects.”

“For this reason, we are not concerned about a disorderly slowdown in China this year. We are more worried about the medium term, when the sugar rush wears off. A higher debt level and a bigger housing bubble will leave the Chinese economy more vulnerable than the current challenge.”