China’s Near-Term Outlook Remains Challenging | American Funds

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Investment Insights

September 2015

China’s Near-Term Outlook Remains Challenging

Economist Stephen Green discusses China’s slowing economic growth and government stimulus measures.

Video

Featuring

Stephen Green

Transcript

Stephen Green: The next six months I think it’s going to, China’s going to get slightly better rather than worse, although we’ve yet to see any really concrete evidence for the economy turning. We’ve had a tough 24 months. Growth is pretty slow out there. A lot of folk are pretty skeptical about the official GDP growth statistics. We, seven percent is what the government tells us, but many folk, including myself, are little bit skeptical about the veracity of that number.

When you look across the investment complex, you know, real estate or infrastructure, I think there’s a lot of evidence to suggest that actually we’re in recession, or at very, very low rates of growth right now. But when you look across into the consumption and services parts of the economy, and they’re getting, they’re doing much, much better. So if you look at parcel deliveries coming out of Alibaba’s Tmall, they’re running at 40, 50 percent year on year growth. Go a coffee shop, well-known American coffee shop, and they’re doing sort of mid-single, mid-double digit’s growth. So I think on the consumption services side, we’re probably running at four, five, six percent, but the investment side is pretty weak.

Where do we go from, what happens in the next six months? Well, the government’s trying to conservatively stimulate monetary policy. Cutting interest rates and doing some other things. And that should gradually begin to feed through to slightly better activity I think in the next six, 12 months. We’re going through a very difficult part of the cycle. I think next year and the year after should be a bit better. I think we really should be running potentially around six, seven percent eventually, but right now we’re probably considerably weaker than that six, seven percent growth rate.


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