Revising down our China GDP forecast

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By Iris Pang

How’s the Chinese economy doing?

China has been proud of its attempt to successfully reform into a more consumption-based economy. But consumption is currently rising very slowly, growing only 1.7% year-on-year in December. In contrast, fixed asset investment grew 4.9% year-to-date YoY, and production grew 4.3% YoY in December.

Industrial production is somewhat difficult to control given that it is partly affected by export demand. But domestic demand for production comes from consumption and investment, which can be affected by government policy.

Consumption growth is very flat, which could be a sign that jobs and wages have not grown fast enough to trigger more consumption.

Among investment, consumption and production, investment growth has been the strongest, but it is still very slow by Chinese standards, which usually sees growth in the mid-teens. This part of the economy has been affected by…

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