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CHINA: Regular economic growth but problems of industrial overproduction

The transformation towards an economy based more on services and consumption, brought the yearly growth rates under the level of 10%. The yearly GDP growth, sustained by private consumption, could stabilise at a rate of 6.5% that confirms China as the locomotive of the world
economy. In June, the retail sales registered the higher increase since one and a half year (+11% y/y). The industry produced a +7.6% on a yearly basis. In the 1st half year, the steel production increased by 4.6% y/y pushed by its appreciation. Public owned industries in different sectors (aluminium, steel, concrete, chemical, refineries), which employ about 16 million workers, are not profitable anymore because of production overcapacities. This steals resources away from the local productive system. In the 1st half year, the investments increase of the private economy reached a slight +2.8% y/y while a growing number of Chinese firms invest abroad looking for profitability and for know-how.
State industries will be reformed through partial privatisations and through a new approach in the managing models. The government is trying to counter the speculative bubble on the estate market and the growing indebtedness. The global debt in China reached 277% of the yearly GDP. According to the FMI, the debt rate of businesses (150% of the GDP) would be particularly worrying. The estate market registered a slow-down, at least in the big cities. The increase of the new construction sites gets slower (May ’17: +15% y/y)
and the mortgage credits (-9.6% y/y) diminished in May for the first time since March 2015.

September 2017

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