Over the weekend, China acknowledged what we’ve long known. The second-largest economy in the world is slowing. Yup, China cut its (highly suspect) 2017 growth outlook.
Chinese growth would be around 6.5% this year, the government said in a report from its annual meeting of parliament; that compares against last year’s 25-year low of 6.7%. The Chinese politburo said it wanted to build a “firewall” against financial risks and cool down a housing market inflated by billions in government fiscal and monetary stimulus.
We’ve been warning of the slowdown for some time now.
The ripple effects of last year’s massive Chinese stimulus program have reverberated around the world, says Hedgeye Senior Macro analyst Darius Dale in the excerpt above from The Macro Show this morning. Its stimulus perpetuated much of the recovery in commodity prices, the cyclical side of the U.S. economy and commodity-exposed emerging market economies last year, Dale says.
With the bar for Chinese growth lowered, the government has lifted some of the market-based pressure to stimulate once again in 2017, Dale says. Long-term market stresses to the economy remain.
For more on that, click here to read, “China Has A $24 Trillion Problem & Is ‘Extremely Vulnerable.’