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18 May 2017

International Economy

Exports Immune to China’s Cooling Economy – 7% Growth Estimated for 2017 (Business Brief No.3679 Full Ed.)

China's April 2017 economic indicators showed signs of weakness as a consequence of state implementation of programs to deal with overcapacity in the manufacturing sector, as well as stringent measures to sort out an overheated real estate sector. We at KResearch maintain that China's real estate sector, which has been one of the nation's highest yielding economic drivers, will likely cool somewhat because the Bank of China is pursuing tougher fiscal policies. Accordingly, economic growth there will likely slow over the remainder of 2017 versus the 6.9 percent growth YoY achieved in 1Q17.

Despite that risk, the Chinese economy will likely continue to thrive and meet the government's growth target. Factors supporting China's economic performance include a revival in international trade, led by exports that are expected to grow 4.2 percent after a two-year slump, as well as private consumption that has continued to thrive. This is confirmed by the Consumer Confidence Index that has remained over 110 for two months in a row (March-April 2017), not to mention the fact that the index hit a 9-year high.

Considering that its 1Q17 6.9 percent YoY growth is better than expected, we have revised our projection on China's 2017 GDP growth upward to 6.5 percent, versus our previous estimate of 6.4 percent. China's prospects over the rest of this year will still require monitoring, thanks to the risks imposed by state economic reforms and more stringent supervision of the real estate sector.

In addition, the revival seen in China's export sector that has been growing since 4Q16, coupled with steady growth in private consumption, are factors that have forced China to import more to meet the needs of its industrial sector, plus those of higher domestic consumption. KResearch is optimistic about our shipments to China in 2017, foreseeing growth of 5.5-8.8 percent, with a median of 7.0 percent. The downtrend that has been witnessed in the real estate sector and industrial manufacturing that are facing government reforms should not have a profound effect on Thailand's related exports to China such as steel and other metal products.

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International Economy