FXStreet (Delhi) – Research Team at Deutsche Bank, expects growth in China to slow further in the coming year to 6.7% from 7.0% in 2015 and 7.4% in 2014, offering little respite for commodity producers.
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“This will probably force continued output cuts to close the supply-demand gap for resources. We think that by the end of 2016, this will have been achieved in the oil market, thanks to production cuts, especially in the US; but in most other commodity markets, balance should be restored only in 2017.”
“But the China forecast offers some hope in that the source of demand growth could shift at the margin back towards more commodity-intensive infrastructure and property investment. The 2017 forecast offers more encouragement for commodity exporters in the form of an end to the China slowdown – growth is expected to be maintained at 6.7% – perhaps allowing for the return to a positive cycle in commodity prices once supply cuts have been effected in 2016.”
“In the near term, we think maintaining the gentle downward glide path to growth in China will require more fiscal and monetary stimulus – we expect two more rate cuts, for example – but the recovery in the property market could remove some of the downward pressure on Chinese growth. The rate at which property prices are rising – and the stabilization of prices in more and more smaller cities – combined with the rise in land sales revenues could be taken as indicators that property investment could be heading for a familiar boom following the 2014 ‘bust’. Our forecast is for a more restrained rebound, however, as a large stock of unsold properties and slowing of rural-to-urban migration serve to limit developers’ enthusiasm to reinvest.”
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