Euler Hermes
Economic Outlook no. 1189-1190 |Macroeconomic, Risk and Insolvency Outlook
China
Cautious recovery
Overview Monetary policy turned expansionary, as the growth slowdown became more pronounced in 2012 and there are signs of a pick-up in Q4, after GDP growth of +7.4% y/y in Q3. Policy stimulus, however, is set to be much more limited than in 2009-10 as growth objectives have become more moderate. Nonetheless, together with some improvement in global demand as 2013 progresses, GDP should grow by +8% in 2013 and +8.2% in 2014. Two key risks are lower-than- expected global demand growth and the real estate sector, though the authorities have some scope for further policy expansion.
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Personal consumption growth will strengthen in 2013 and 2014, but, is unlikely to return to the pace of 2011. Having weakened in 2012 to August, retail sales growth picked-up and was +14.5% y/y (nominal) in October. Lower inflation (2% y/y November) will help underpin consumption prospects. While re-balancing towards consump- tion continues to be a key objective, investment is the main driver of the upturn and is likely to remain so in the immediate future.
Industrial output began to recover from September and manufacturing PMIs have improved. With policy more expansionary, fixed investment growth in 2013-14 should return to a similar pace as in 2011 and will lead overall growth, after growing at its slowest in 2012 since 2008. The property sector remains a downside risk, though hous- ing sales registered a small increase in the first 11 months of 2012. Insolven- cies are expected to rise +2% in 2013 after a -14% fall in 2012.
Export growth has slowed markedly to +10.7% y/y (nominal) in Jan-Nov 2012 (+20.7% Jan-Nov 2011) and monthly performance is erratic, but the trend is improving. Exports to the EU have been hard hit. Import growth has
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slowed even more (+5.1% y/y) reflect- ing more subdued domestic demand growth and high commodity invento- ries. The Jan-Nov cumulative trade sur- plus was higher than a year earlier. Trade and current account surpluses will persist in 2013-14. In volume terms, both exports and imports of goods and services growth will strengthen in 2013-2014 and the net trade contribution to growth will be positive. Yet, the likely vigour of exports remains a crucial uncertainty.
Policy is expansionary but the stimu- lus is more cautious than in 2009-10. Under the new leadership unveiled at November’s national party congress, policies are likely to remain cautious, probably retaining +7.5% as the official GDP growth target. There remains scope for some further stimulus, how- ever, should it prove necessary._DA
Insolvencies in number of cases
10,000
1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000
0 9 9 9 9 9 0 0 0 0 0 1 1319753197531
Sources: China Court, Sinotrust, Euler Hermes calculations and forecasts
Trading partners
USD billions: exports (FOB), imports (CIF) 12-months cumulative figures to end of Dec 2011
Country Total
of which, euro zone USA
Hong Kong Japan
Korea (South) Germany Country Total
of which, euro zone Japan
Korea (South) USA
Germany Australia
Exports Share of total 1,901 260 325 268 147 83 76
Imports Share of total 1,741 174 194 162 119 93 81
100% 10.0% 11.2% 9.3% 6.8% 5.3% 4.6%
Sources: IHS Global Insight, IMF
100% 13.7% 17.1% 14.1% 7.7% 4.4% 4.0%
Note pays structurelle
Country Risk Level B LOW
Economic forecasts
Change over the period, unless otherwise indicated: * contribution to GDP growth ** CNY bn
forecasts
CHINA GDP
Consumer Spending Public Spending Investment Exports Imports
Net exports Current account * **
Current account (% of GDP) Inflation
General gov. balance ** **
2011 2012 2013 2014 9.2 9.9 5.9 9.2
13.0 11.9 1.0
7.6 8.0 7.0 6.9 8.0 4.5 5.1 0.4
2.9 2.5
7.3 7.4 9.3 6.5
8.2 7.5 7.2 9.5 8.5
7.5 10.0 0.4
0.5
1,303 1,520 1,675 1,635 2.8 5.4
2.9 2.0
General gov. balance (% of GDP) -1.1 Public debt (% of GDP) Nominal GDP
2.6 2.6
-519 -675 -628 -633 -1.3 -1.1
-1.0
25.8 22.2 20.0 20.0 46,547 51,760 57,713 63,279
Sources: Economist Intelligence Unit, ADB, World Bank, Euler Hermes forecasts
32 117 428 710 1,625 2,348
5,697 6,227
5,622 7,746
7,219 7,500
9,110
2,923 3,196
3,630 4,358 4,555
3,715 4,448
2,620 2,670
3,043
6,065
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