China's slowdown ends

Synopsis

China's slowdown is officially over as the economy grew 7.9% in the fourth quarter, surpassing expectations. However, this marks the worst annual performance for China in a decade. Wei Yao, a China Economist at Societe Generale, discusses the factors driving this recovery, noting that exports significantly contributed to the Q4 rebound, while investment and consumption played lesser roles. Despite the positive growth, Yao expresses skepticism about the sustainability of this recovery, citing potential tightening of credit conditions due to rising housing prices and issues within The Shadow banking system. Recent financial scandals and defaults may prompt regulators to impose stricter regulations, which could hinder liquidity in the second half of the year. As concerns about a hard landing resurface, Yao highlights the imbalanced growth model of the Chinese economy as a critical factor that could trigger renewed fears of economic slowdown.