Mixed signals and long-term anxiety over China’s economy

Business & Technology

A summary of the top news in Chinese business and technology for June 19, 2017. Part of the daily SupChina newsletter, a convenient package of China’s business, political, and cultural news delivered to your inbox for free. Subscribe here.

The New York Times reports (paywall), “In a survey released by Bank of America-Merrill Lynch, fund managers in May named China the biggest potential source for an unpleasant surprise for global markets for the first time since January 2016.” China’s rapidly rising debt load — 257 percent of GDP at the end of 2016, up from 152 percent in 2007, and far beyond the 184 percent average for emerging economies — is a central source of concern to investors, the Times notes. The high debt level in China’s economy was also precisely the reason that credit ratings agency Moody’s cited when it downgraded the country’s rating in May, for the first time since 1989.

Nevertheless, most of the mainstream investing world remains cautiously optimistic about China’s economy. The stock-index compiler MSCI is forecast to have a decent chance of adding a selection of China’s stocks into its key, influential benchmark this week, and in March, Goldman Sachs “recommended investors increase their holdings of Chinese stocks, citing improved economic growth, stable policies and other positives,” the Times said. One of those positives, for the time being anyway, is that policymakers are “likely to do whatever they can to prevent drastic shifts in asset values” ahead of the important Communist Party meetings to be held later this year.