Problems in China Likely to Resurface in 2016

Recent positive data from China may have allayed some doubts about the state of the economy, but PNC Financial Services Group is staying cautious, warning of a “perfect storm” that could surface in two years’ time.

“Several problems long on China’s back burner are likely to come to a head by 2016,” Stuart Hoffman, chief economist at Financial Services Group wrote in a report this week, citing challenges including a weakening credit market, a slowdown in corporate reinvestment of earnings and a correction in the all-important housing market.

These headwinds could slow Chinese real GDP (gross domestic product) growth to around 6.0 percent in 2016, the slowest since 1990, the firm noted.  China’s economy expanded 7.5 percent in the second quarter, a touch above expectations of and rising from 7.4 percent in the first three months of the year, as the government’s targeted stimulus measures began to pay off.


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