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China: Moderate slowdown expected during 2017 – Danske Bank

According to analysts from Danske Bank, Chinese leading indicators, signal a peak in the cycle. They expect a moderate slowdown during 2017.

Key Quotes: 

“Chinese leading indicators have pointed to a peak in the cycle for some time. The recent round of PMIs suggests the peak is taking place in Q1.”

“We look for a moderate slowdown during 2017 as the leading indicators support: 1. Slowing housing market; 2. Fading boost from infrastructure.”

“Exports serve as a buffer as they are underpinned by a) stronger global growth and b) a weaker CNY. The main risk is a hit to exports if there is a trade war with the US.”

“Monetary policy has been tightened moderately but we do not expect a lot of tightening this year as the cycle fades and inflation is still low.”

“Three years of monetary policy easing is over – policy is tightening now to stop bubbles and leverage. This is reinforced by tighter rules for home buyers in many cities in H2 16”.

“Financial implications of moderate slowdown: Less support for EM assets and global risk appetite, fears of a hard landing may resurface – and outflows pick up, continued downward pressure on the CNY and support to commodity prices to fade.”

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