China’s real economy robust, but cracks in growth model?

HONG KONG - China’s macro economy remained resilient in February after a strong start of 2017. Specifically, the Caixin manufacturing PMI expanded at almost its fastest rate in four years. Other business indicators and external indicators also climbed significantly.

But global asset manager Natixis suggests that while China’s macro economy has been strengthening, developments in the financial sector are less appealing as banks are increasingly feel the brunt of an excessively-leveraged economy. “We believe that the PBoC might need to give up on its regulatory tightening,” Natixis says.

Chinese authorities recently implemented a new round of cooling measures in more than a dozen cities, but Natixis says i. Yet we do not think the latest endeavours to curb housing prices are substantial enough to reverse the upward housing cycle.

“Since February, PBoC has tightened the grip on liquidity, which has caused banks to struggle for funds, pushing up the cost of funding in the interbank market,” it says. www.natixis.com (ATI).