Markets: Financial market volat ility w ill remain elevated ref lecting
an unbalanced rebalancing. GDP grow th will decelerate further to
+6.5% in 2016 and to +6.4% in 2017 and volatility w ill increase.
Ownership: Policymakers are likely to step up easing measures
w ith a rise in the def icit target (-3.5% of GDP f rom -2.3%), eased
monetary policy (-50bps policy rate cut, -100bps for Reserve
Requirement Rat ios) and low er renminbi (6.8-7 RMB for 1 USD).
Clearer choices and communication w ill be provided to reassure
the private sector.
Non-payment: In 2016, insolvencies w ill increase by +20% and
DSO to 84 days. Corporate debt is high (160% of GDP) and
gearing w ill increase for industrial sectors (heavy machinery,
construction and commodities) w hile sectors related to consumer
demand (food), high end (computer) and subject to government
targets (aeronaut ics, automot ive) could experience more limited
credit risks.
Kapital expenditure i.e. investment: Company prof its are expected
to stabilize af ter -2% in 2015 on the back of modest sales
volumes, deflationary pressures and tepid external demand.
Investment growth will be below +5% in real terms for the first time
in 25 years. Ongoing deleveraging, capital flight and lower FDI will
limit investment financing.
Exports black hole: China has been on a trade roller-coaster for
the past year with limited export revenues in USD terms and
causing major disruption to its t ier 1 suppliers of raw mater ials
(Malaysia, Lat in America, Middle East and Af rica) and to partner
hubs (Singapore, Hong Kong and Taiw an). Solace could come in
the form of a massive mercantilist move (One Belt One Road).
Yuan: Downward pressures are increasing including a w eaker
export performance, tighter monetary policy in the U.S. and high
deflationary pressures. In the short-run, competitiveness gains
would be largely offset by another miscommunicated depreciation.
an unbalanced rebalancing. GDP grow th will decelerate further to
+6.5% in 2016 and to +6.4% in 2017 and volatility w ill increase.
Ownership: Policymakers are likely to step up easing measures
w ith a rise in the def icit target (-3.5% of GDP f rom -2.3%), eased
monetary policy (-50bps policy rate cut, -100bps for Reserve
Requirement Rat ios) and low er renminbi (6.8-7 RMB for 1 USD).
Clearer choices and communication w ill be provided to reassure
the private sector.
Non-payment: In 2016, insolvencies w ill increase by +20% and
DSO to 84 days. Corporate debt is high (160% of GDP) and
gearing w ill increase for industrial sectors (heavy machinery,
construction and commodities) w hile sectors related to consumer
demand (food), high end (computer) and subject to government
targets (aeronaut ics, automot ive) could experience more limited
credit risks.
Kapital expenditure i.e. investment: Company prof its are expected
to stabilize af ter -2% in 2015 on the back of modest sales
volumes, deflationary pressures and tepid external demand.
Investment growth will be below +5% in real terms for the first time
in 25 years. Ongoing deleveraging, capital flight and lower FDI will
limit investment financing.
Exports black hole: China has been on a trade roller-coaster for
the past year with limited export revenues in USD terms and
causing major disruption to its t ier 1 suppliers of raw mater ials
(Malaysia, Lat in America, Middle East and Af rica) and to partner
hubs (Singapore, Hong Kong and Taiw an). Solace could come in
the form of a massive mercantilist move (One Belt One Road).
Yuan: Downward pressures are increasing including a w eaker
export performance, tighter monetary policy in the U.S. and high
deflationary pressures. In the short-run, competitiveness gains
would be largely offset by another miscommunicated depreciation.