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26 Jan 2016
China: Financial sector’s contribution yet to normalise – Nomura
FXStreet (Delhi) – Research Team at Nomura, suggests that China’s financial sector’s outsized contribution to growth has yet to normalise, adding downward pressure on growth when it does.
Key Quotes
“Financial services growth has yet to fully normalise, contributing 0.9 percentage points (pp) to GDP growth in Q4 – still 0.2pp higher than the Q4 average for 2012-14, although it has retreated from 1.3pp over Q1-Q3 2015. This could be due to still-high (54.3% y-o-y) stock market turnover growth in Q4, albeit much lower than the 119.9% in Q3. Given weak stock market sentiment (daily trading volume falling 8% y-o-y over 1- 19 January), we believe its outsized contribution will normalise and add downward pressure on 2016 growth.
Growth of “other” services picked up to 9.9% y-o-y in Q4 from 9.5% in Q3 and an average 7.7% for Q4 2012-14. Its contribution to GDP growth rose to 1.6pp in Q4 versus a 1.2pp historical average for Q4 2012-14. Though this may reflect an improved economic structure, we cannot ignore the possibility of overestimation as the rise clearly contradicts the overall trend of the whole economy.
Most other sectors (notably industry) decelerated and contributed less to growth than their historical averages.
Overall, we still see strong downward pressures and maintain our forecast of 5.8% GDP growth for 2016.”
Key Quotes
“Financial services growth has yet to fully normalise, contributing 0.9 percentage points (pp) to GDP growth in Q4 – still 0.2pp higher than the Q4 average for 2012-14, although it has retreated from 1.3pp over Q1-Q3 2015. This could be due to still-high (54.3% y-o-y) stock market turnover growth in Q4, albeit much lower than the 119.9% in Q3. Given weak stock market sentiment (daily trading volume falling 8% y-o-y over 1- 19 January), we believe its outsized contribution will normalise and add downward pressure on 2016 growth.
Growth of “other” services picked up to 9.9% y-o-y in Q4 from 9.5% in Q3 and an average 7.7% for Q4 2012-14. Its contribution to GDP growth rose to 1.6pp in Q4 versus a 1.2pp historical average for Q4 2012-14. Though this may reflect an improved economic structure, we cannot ignore the possibility of overestimation as the rise clearly contradicts the overall trend of the whole economy.
Most other sectors (notably industry) decelerated and contributed less to growth than their historical averages.
Overall, we still see strong downward pressures and maintain our forecast of 5.8% GDP growth for 2016.”