Economic context 

Economic Situation

 China is the second largest economic power in the world and the first exporter. The growth focused mainly  on exports that the country had started in 2009 was interrupted by a global recession.

There are still large differences in level and quality of life between the city and the countryside and between the urban areas of the coasts of China and the interior and the west of the country.

It is still true that poverty has declined considerably in China, and almost 10 % Of the population (which  can translate to more than 120 million people) lives on less than $ 1 a day. Further down in 2015 there was another global economic slowdown due to the decline in trade, 7% in 2015, its lowest level in 25 years. In 2016, growth was 6.6% of GDP, and is expected to only be 6.2% in 2017.

In 2016, the Chinese economy continued its slowdown, which has resulted in a clear recession in the northeastern region, dependent on heavy industry, public enterprises and mining. Manufacturing activity once again grew. State-owned debt accounts for 145% of GDP, while private sector debt accounts for about 210% of GDP in March 2016.

The 2016-2020 five-year plan foresees growth of 6.5% and the government has envisaged a deficit budget of 3% in 2016 in order to finance tax cuts for companies.

Aspects as:

• The aging of the population
• The reduction of the labor force
• The lack of openness of the political system
• The competitiveness of an economy dependent on high investment costs
• Credit expansion continues to be a serious problem for the country

MAIN ECONOMIC INDICATORS TO BE TAKEN INTO ACCOUNT

STRENGTHS AND WEAKNESSES

STRENGTHS

– Reduction of the risk of external over-indebtedness due to the high level of foreign exchange reserves

– Development of the infrastructure and services sectors

WEAKNESSES

–  Strong volatility in the market

– Social tensions that are conditioned by the inequality in the population

– Weak share of consumption (GDP)

– Aging of the population

– Fragility in Chinese banks due to rapid credit growth and poor asset quality

 THE CHINA RECOVERY WILL NOT PRODUCE THIS 2017

   It is expected that in 2017 the pace of decline will continue, although slight, in China’s business as well as 2016.

   Since 2015 retail sales are losing momentum. In 2016, construction-related sectors benefited from the rebound in              property prices, especially in large cities.

What is expected for 2017?

Although measures are prudent in applying them to cities to limit price increases, they could restrict investment and hamper the sector, although it is very unlikely that there will be a collapse in the real estate market because the authorities have the capacity to act in the event of a severe shock.

In the services sector, growth is also expected for 2017, in particular as regards the financial sector.

Downward pressure on the yuan could increase competitiveness in the country’s prices even if the volume of exports remains weak.