China’s Weekend Congress: Expect 6.5% GDP

March 3, 2017

Chinese Premier Li Keqiang will expound on economic development strategy and growth targets at this weekend’s National People’s Congress.

UPDATE: the Chinese government confirmed it is expecting 6.5% growth in gross domestic product this year, CNBC reports.

The global strategists at SGH Macro Advisors, CEO Sassan Ghahramani and Kevin Muehring, note that maintaining economic stability has been the top priority of China’s decision makers, followed by preventing financial risk, preventing capital outflows, and ensuring foreign currency reserves do not fall too sharply. Here’s what they predicted would be among the top talking points this weekend:

“… The CPC [central committee] has approved, and Li will announce, a GDP target of 6.5% growth year on year for 2017, the lowest since 2000. The target for CPI growth will be 3%, the same target as last year. The deficit to GDP ratio will also remain at 3% …

On the currency front, Li will not point to either RMB [Renminbi, or the Chinese yuan] appreciation or depreciation. He will rather reiterate that China will continue to improve its market based mechanism for setting the Renminbi rate to ensure it remains generally stable at an appropriate and balanced level. Separately, Chinese sources expect any RMB depreciation, if it happens, to be modest this year, and less than the depreciations of 2016 or 2015 …

On the monetary front, the target for 2017 M2 money supply growth has been set at 12% growth year on year, one percentage point lower than last year’s target of 13%. And on the instructions of the Political Bureau, the People’s Bank of China (PBoC) will seek to ensure the scale of credit growth does not exceed last year’s …”

The iShares China Large-Cap exchange-traded fund (FXI) and the Deutsche x-trackers Harvest CSI 300 China ETF (ASHR) each slipped about 1.8% this week, while the iShares MSCI Emerging Markets ETF (EEM) slipped 0.8%. Each fund is up 9% so far this year.

The iShares MSCI South Korea Capped ETF (EWY) fell 2.3% in the week that was, and the VanEck Vectors Vietnam ETF (VNM) slipped more than 2%. See our posts Controversial Vietnam Construction Stock Added To Index and China Not A Currency Manipulator, For Now: Mnuchin and all our recent posts on China.

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