Country Economic Forecasts > China

Global financial markets made a very nervous start to the year, in large part driven by worries about the underlying strength of the Chinese economy. However, Chinas still underdeveloped stock market is typically not driven by economic fundamentals. Moreover, recent data do not indicate a significant weakening. Officially reported GDP growth eased to 6.8% in Q4, while our alternative, bottom-up, estimate of GDP showed growth of 6.1% in Q4 (6.3% on average in 2015); both measures point to only a relatively gradual slowdown.Consumption continues to cushion the weakness in industry, with rapid growth in real household income supporting private spending and fast expansion of the service sector. This should also reduce the risk of labour market stress in the short term. However, we expect consumer spending growth to ease this year as wage increases moderate. And the risk remains that the weakness in industry spills over more forcefully into consumption and the wider economy. Overall, we forecast that officially reported GDP growth will ease to 6.3% this year and 6% in 2017, with real estate construction remaining a drag and official fiscal policy playing a larger role in supporting growth than in the past.