China: Consumption story confirmed by data - ING

China’s GDP grew higher than expected at 6.9%YoY in 2Q led due to strong consumption story, according to Iris Pang, Economist at ING and as a result ING has revised their forecast for the whole of 2017 to 6.8%.

Key Quotes

“GDP and other data confirm our view that China is now a consumption driven economy. Retail sales grew 11%YoY, beating all the forecasts (ours was 10.7%YoY), while fixed asset investment at 8.6% YTD YoY although slightly higher than our estimate of 8.4%, was still low compared to the growth of retail sales.”

“Consumption and exports will continue to drive growth in 2H, and these two categories in GDP will continue to support industrial production. Investment will play a smaller role in industrial production, especially when property developments in prime locations are going to slow down. Altogether, these should mean slower growth in 2H but at a lesser extent than we had previously thought.”

We therefore revise our “GDP forecasts for 2H lower. Due to higher base effects in 4Q and slower investment growth. We estimate that GDP growth will slow to 6.8% and 6.7% in 3Q and 4Q respectively. That results in a 6.8% projection for the whole of 2017.”