China 2018 Economic Report H1

Executive Summary

• China’s economic rebalancing from stimulus and exports towards a more services, consumer demand and innovation-driven economy is increasingly underpinning GDP growth.
  
• Following a period of stabilization, in 2017, China’s economy expanded by +6.9% YoY, seeing its first acceleration in annual GDP growth since 2010.
  
• Improved external demand, reviving domestic consumption and rebounding manufacturing investment point to a more broad-based recovery in 2017, while growth steadiness was maintained in 1Q2018.
  
• The target growth rate of around +6.5% YoY remains achievable and allows for deeper structural reforms as regulatory tightening to mitigate environmental and financial risks remain drags on growth.
  
• The 2018 National People’s Congress unveiled wide restructuration including the merger of the banking and insurance regulators & formation of a new State Market Supervision Administration.
  
• A step towards the opening of the financial sector shows that reforms conducive to foreign companies remain on the agenda. New rules for securities companies were published on May 1, 2018.
  
• Chinese foreign trade recovered sharply in 2017 (+11.4% YoY), the recovery extending into 1Q2018 (+16.3%, YTD, YoY) amidst a more benign external environment and stronger internal demand.
  
• Total bilateral trade in goods decreased by 5.1% YoY in 2017 but increased again by 45.9% YoY in 1Q2018, while the trade balance continued to be positive for Switzerland during both periods.
  
• Chinese non-financial outward direct investment decreased by 29.4% YoY in 2017 amid the implementation of pertinent capital control measures and curbs on overseas investment. 
  
• Meanwhile, non-financial inward foreign direct investment in China increased by 7.9% YoY in 2017, reaching an all-time high of USD 135 billion.
  
• A survey in 2017 revealed that the investment appetite of Swiss companies is still considerable and growing: 61% of Swiss companies (up 4 ppt from 2016) planned to increase their investment in China.