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China to Abandon 6.5% Economic Growth Goal by 2018, SocGen Says

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  • China to Abandon 6.5% Economic Growth Goal by 2018

China is poised to abandon its 6.5 percent growth target sometime in the next two years as leaders push to contain asset bubbles and financial leverage, according to Societe Generale SA.

Signals pointing to acceptance of an expansion below the current objective are encouraging, though authorities haven’t yet confronted the test of a deceleration, which will come in the second half of next year, Yao Wei, chief China economist at SocGen in Paris, said in a note.

She said the most likely change in guidance would be to the phrase “around 6.5 percent” in March, when top leaders convene, then an explicitly lower range of 6 percent to 6.5 percent, or even 5.5 percent to 6.5 percent, at the national Communist Party congress late next year.

“We think that the arbitrary growth target will be given up — if not in 2017, then definitely in 2018,” Yao wrote. “The harm of keeping it is all too apparent, for it has become not only an impediment to the necessary structural adjustments but also a culprit behind rapidly rising debt risk.”

Last year, policy makers pledged an annual growth rate of at least 6.5 percent for five years through 2020 to achieve the party’s promise of building a “moderately prosperous society.” President Xi Jinping is open to growth slowing below the target due to rising debt and concern about an uncertain global environment after Donald Trump’s election win, a person familiar with the situation said last week.

Below-target growth

One of the most explicit signals that leaders are more willing to tolerate below-target growth is their mention of a neutral monetary policy stance in the statement issued after the Central Economic Work Conference earlier this month, Yao wrote. That policy stance has officially shifted from easy to neutral, and authorities are determined to contain asset bubbles and financial leverage, she wrote.

The People’s Bank of China has held its benchmark interest rate at a record low for more than a year. But it has allowed a steady increase in money market rates to squeeze leverage in the financial system, using reverse-repurchase operations to raise funding costs.

“In light of the trajectories of growth and inflation, it is indeed time for the PBOC to shift its stance to neutral,” Yao wrote. “A neutral monetary policy stance does not necessarily mean policy rate normalization, while no policy rate hikes can still mean quite some tightening.”

For this year, the government set a range of 6.5 percent to 7 percent for it’s economic growth target, slower than last year’s goal of about 7 percent. The world’s second-largest economy is on track to meet that 2016 goal after three straight quarters of 6.7 percent expansion.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Crude Oil Pulled Back Despite Joe Biden Stimulus

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Crude Oil Pulled Back Despite Joe Biden Stimulus

Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.

Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.

On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.

OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”

Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.

The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.

Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.

But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.

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Crude Oil

OPEC Says Uncertainties Remain High in 2021

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OPEC Says Uncertainties Remain High in 2021

The Organization of the Petroleum Exporting Countries (OPEC) on Thursday said global uncertainties remained high going forward in 2021 but kept its oil demand forecast unchanged.

In the cartel’s latest oil outlook for 2021, oil demand is expected to increase by 5.9 million barrels per day year on year to 95.9 million barrels per day. The prediction was unchanged from December’s assessment.

However, OPEC and allies, said: “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.

Crude oil rose to $57 per barrel this week after incoming US President Joe Biden announced it would inject $1.9 trillion stimulus into the world’s largest economy.

But the recent rally in the commodity and stimulus announcement is expected to boost US crude oil output and disrupt OPEC+ production cuts strategy for the year.

The 2021 supply outlook is now slightly more optimistic for U.S. shale with oil prices increasing, and output is expected to recover more in the second half of 2021,” OPEC said.

Still, OPEC, in its forecast “assumes a healthy recovery in economic activities including industrial production, an improving labour market and higher vehicle sales than in 2020.”

“Accordingly, oil demand is anticipated to rise steadily this year supported primarily by transportation and industrial fuels,” the group said.

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Brent Crude Oil Rose to $56.25 Per Barrel

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Brent Crude Oil Rose to $56.25 Per Barrel

Oil price surged following the declaration of Joe Biden as the President-elect of the United States of America last week after Trump’s mob invaded Capitol to disrupt a joint Senate session.

Also, the large drop in US crude inventories helped support crude oil price to over 11 months despite the second wave of COVID-19 crushing the world from Asia to Europe to America.

Brent crude oil, against which Nigerian Crude oil is priced, rose to $56.25 per barrel on Friday before pulling back to $55.422 per barrel on Monday during the London trading session.

Experts attributed the pullback to the rising number of COVID-19 cases in Asia with about 11 million people already locked down in Hebei province in China.

Covid hot spots flaring again in Asia, with 11 million people (in) lockdowns in China Hebei province… along with a touch of FED policy uncertainty has triggered some profit taking out of the gates this morning,” Stephen Innes, chief global market strategist at Axi, said in a note on Monday.

China, the world’s largest importer of crude oil, has joined the United Kingdom and others declaring full or partial lockdown to curb the second wave of COVID-19.

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