Economy: Better times ahead in China
Investors can begin to breathe more easily. Danske Invest's chief analyst Bo Bejstrup Christensen expects that the growth in China will cease to decline and once again begin to increase moderately.
The growth in the Chinese economy has bottomed out and is again ready for showing slight increases in the course of 2014. This is the view of Danske Invest's chief analyst Bo Bejstrup Christensen. Thus, there are prospects that China, once again, will contribute to the general optimism in respect of the growth in the global economy.
Within recent years, however, China has disappointed many players - both investors and analysts. This is not so because growth has collapsed, but because the expectations simply have been too high. A couple of years ago, many people expected that the Chinese economy would continue to grow by at least 8% annually. Last year, China delivered instead "only" slightly above 7%. At the beginning of 2014, many players expected that 2014 would be the year in which Chinese growth once again would exceed 8%. However, at the end of the first quarter the status was that growth actually showed additional falls instead of increases. Most recently, the national Chinese statistics office has published data that the economy experienced growth at less than 6% during the first months of the year. Moreover, disappointing economic data have increased the nervousness in China and within emerging markets - particularly during the first two months of the year.
However, now Danske Invest's chief analyst Bo Bejstrup Christensen is optimistic. In his view, the worst has passed by now, and there are better times ahead.
"We are of the opinion that the slowdown in China has been driven by a tightening process - i.e. a necessary tightening process. There was a risk that the housing market would develop a bubble, and most importantly - we were worried that the growth in lending had been too high for too long. Therefore, we are very pleased to see that the growth in lending appears to have been reduced significantly," says Bo Bejstrup Christensen. In his view, the tightening process is now a closed chapter which implies that there will once again be room for Chinese growth to increase.
"We expect that the growth in China has ceased to fall, and if we look six months ahead from now we expect that growth will slightly increase up to approx. 6.5%," says Bo Bejstrup Christensen.
If the expectations prove correct, this will imply that China will contribute with yet another cylinder to the global economic growth engine, which is expected to be the strongest engine since 2011. In addition, an increasing growth in China will also contribute to stabilising both emerging markets stocks and bonds, which otherwise have experienced a weak 2013 - something which continued into the first months of 2014.
