China: Property tightening presages cyclical downturn - RBS

Research Team at RBS, suggests that the property policies matter more in shaping China’s business cycle than monetary and fiscal policies.

Key Quotes

“During China’s National Holiday last week, more than 20 large cities have ramped up actions to cool down overheating property prices, by resuming purchase restrictions and tightening mortgage rules.

We expect a property-led cyclical downturn to materialise in 2017, which seems yet to be priced in by the market. We now expect GDP growth to slow from an estimated 6.7% in 2016 to 6.6% in 2017. A less favourable cyclical position, together with rising structural vulnerabilities, underlies our forecast of the yuan’s stop-and-go depreciation, with USDCNY climbing up to 7.20 by end 2017 and CFETS CNY index heading towards 85-86 in the coming year.”