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China Economic Forecasts and Risk Ratings

Slower economic growth forecasted due to excess capacity, housing glut and debt bubble

With a boost from the industrial sector, China's real GDP rose 6.9% year on year in the first quarter of 2017, up from 6.7% in the fourth quarter of 2016. IHS Markit forecasts that, despite this jump, major cyclical forces stemming from excess capacity, a housing glut and a debt bubble will moderate growth in 2017 to 6.5%. Industrial production growth will also continue to decelerate. It remained below overall economic growth because of cyclical headwinds from excess capacity and the secular trend of the economy's structural transition toward the service sector.

To learn more, visit the China Regional Service.

China’s Near-Term Economic Outlook

  • Economic growth in China rebounded in the first quarter, helped by faster growth in the industrial sector
  • China’s strong first-quarter growth appears unsustainable, as fundamentals of the economy remain constrained
  • China’s economy should slow only modestly in 2017, with policy support attempting to minimize the downturn

China real GDP growth, percent change from prior year, historic and forecast, 2017Q1-2018Q2

China economic growth, percent change from prior year, 2015Q4-2017Q1

Country Risk Rating for China

The government's high-profile anti-corruption drive will continue at least until the next Party Congress scheduled in the fall of 2017, further strengthening Xi Jinping's hold on the party. The population’s increased use of social media combined with a slowing economy will likely catalyze more strikes, while land disputes might decline because of pending land-tenure reforms. On the external front, the Trump administration's proposed punitive tariffs on Chinese imports and taxes on American companies manufacturing in China, although highly unlikely, would prompt China to retaliate by tightening its regulatory norms against foreign companies. The Trump administration's confirmation of the "One-China" policy, in the meantime, reduces the risk of military escalation in the Taiwan Strait.

A note on our risk ratings: IHS Markit derives country risk ratings for 206 countries, based on six separate ratings in each country: Political, economic, legal, tax, operational and security with 22 detailed sub-aggregate risks. These ratings allow you to quantify risk with greater specificity with a scoring system based on a 0.1-10 logarithmic scale. Seven risk bands, from low to extreme, allow you to compare and contrast risk between countries and regions.

Experts

Todd Lee, Ph.D.

Executive Director – Global Economics, IHS Markit

Farid Abolfathi, Ph.D.

Senior Director – Risk Center, IHS Markit

Rajiv Biswas

Executive Director and Asia-Pacific Chief Economist, IHS Markit

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