Ending on a Slightly Slower Note

A strong 2017 for Chinas economy ended on a slightly slower note with most sectors registering small declines in December. Despite a weaker Q4 and December in particular， which is in line with the trend of gradual economic cooling， the annual GDP growth rate appears to have exceeded the target of 6.5 percent， set in March of 2017， by 0.3 points， reaching 6.8 percent. Whilst concerns grow around the imminent slowdown in real estate investment and sovereign debt， sustained public sector investment， gear toward improving the quality of growth， and consumption growth are likely to continue to enable growth of about 6.3 percent in 2018-2019， boosting hopes that a “soft landing” for the Chinese economy will be achieved.

Foreign Exchange Reserves Continue Recovery

Chinas foreign exchange reserves， the largest in the world， rose by $20.7 billion in December， 2017， standing at $3.14 trillion. This was the 11th consecutive month in which foreign exchange reserves grew since falling below $3 trillion for the first time in six years in January 2017. The sustained rise has partly been the result of an ongoing crackdown on capital flight characterized by “irrational” outbound investment， seen as a panic response to the gradually slowing economy. In addition to this， citing the increased value of non-dollar currencies as another reason for the December increase， the State Administration of Foreign Exchange expects cross-border capital flows to remain stable in the coming months.

Key Indicators Dip

The consumer price index （CPI） for 2017 fell well short of the government target of “around 3 percent，” reaching only 1.6 percent， triggering concern around the possibility for deflation which would place downward pressure on consumer spending. Also worth noting is that the producer price index （PPI）， which began registering positive growth for the first time in six years since September of 2016， ended 2017 with a 4.9 percent rate of yearon-year growth， the lowest in over a year. Other indicators also ended the year with a slight dip. Chinas manufacturing purchasing managers index （PMI） clocked in at 51.6 percent， a decrease of 0.2 percentage points from the previous month， which still slightly exceeded the annual average.