Price growth edges lower despite reasonable economy
Insight
July 18, 2014
China Economic Update – 17 July 2014
In late June, China’s politburo agreed to fiscal and taxation reforms that were outlined at last year’s Third Plenum, setting a deadline for implementation at the end of 2016. These reforms should provide greater transparency and predictability of local government revenues.
Government financial reforms could ease local government debt fears
In late June, China’s politburo agreed to fiscal and taxation reforms that were outlined at last year’s Third Plenum, setting a deadline for implementation at the end of 2016. These reforms should provide greater transparency and predictability of local government revenues.
This move follows the introduction of the local government bond pilot scheme, which commenced in June. Guangdong province issued bonds totaling RMB 14.8 billion, with maturities ranging between 5 and 10 years.
Together these measures could reduce the concerns around local government debt and the high dependency on land sales to service debt obligations (a major concern given softening trends in the real estate sector).
Gross Domestic Product
China’s National Accounts data shows that the economy grew by 2.0% qoq in the June quarter and 7.5% in year-on-year terms (levels marginally stronger than market expectations of 7.4%). This result was consistent with partial economic indicators, which showed the economy stabilising in the June quarter, following on from the declines recorded in Q1.
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