China 2017: A good year for the economy, not for investors

CHINA'S growth story is looking very positive, but this may not benefit investors. Policy measures to deter speculative activities and reduce financial system risk are starting to have an effect. However, this may help to boost asset prices elsewhere.

China's economy started the year on a strong note. GDP grew by an above-expected 6.9 per cent and up from 6.8 per cent in the fourth quarter of 2016. Growth had been slowing since the third quarter of 2014, a trend that would have made it difficult to sustain the 6.5 per cent pace that Premier Li Keqiang said was needed for China to become a moderately prosperous society by 2020. We have revised our 2017 GDP growth forecast to 6.7 per cent from 6.5 per cent (consensus 6.6 per cent).

The drivers of growth in the fourth quarter of 2016, housing and infrastructure investment, remained in play in the first quarter of 2017. The added growth came from a new driver: exports, especially electronics exports. Export demand began firming in the fourth quarter of 2016. By the first quarter of 2017, it was evident in stronger manufacturing growth.