A report from the Centre for Economics and Business Research in London projected that China’s economy will have overtaken the United States by 2032. The report also predicted that India would surpass France and the United Kingdom by the end of this decade, and eventually claim top spot by the middle of the century.
However, fourth quarter data also showed that China may be due for an economic slowdown in 2018. Wage and hiring growth slowed down in the fourth quarter while industry continued to ramp up production. The government has managed to boost growth with large infrastructure spending sprees, but an attempt to limit its debt risk has pulled back growth in retail and other sectors.
Average lending rates fell, continuing a trend from the third quarter. Corporate borrowing also fell from the previous quarter.
Investors looking for a long term hold should take a look at the iShares China Index ETF (TSX:XCH). The ETF has climbed 26.1% in 2017 and 42.9% since its inception in February 2010. The index has almost completely recovered from the steep drop suffered in 2015, when Asian markets suffered a precipitous drop led by the China bubble. Much of the reform to limit debt risk has been in response to this event which spread to global markets.
China is looking to modernize its economy in 2018, which could be a temporary drag on growth but will be beneficial in the long term. In addition to its debt reform, China is also putting a greater emphasis on higher quality development. Still, Chinese leadership expects growth around 6.5% in 2018.