China – the Xi puzzle

We’re unlikely to see the real colour of President Xi Jinping’s zeal until after the appointment of the next Politburo Standing Committee at the end of 2017. Credit will remain the support pillar for growth until then, shifting from corporates to the underleveraged consumer. Alongside fiscal stimulus, the consumer’s new appetite to borrow has already helped stabilise growth. It has buoyed property demand and started to turn around previously falling corporate profits (certainly for state owned enterprises (SOEs)). This, alongside easing deflationary pressures, is likely to mean a slower path of renminbi depreciation against the CFETS basket.

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