- The slowdown in China's economic growth has paused since the second quarter of 2016 thanks to stimulus policy measures.
- The stabilisation in industrial production growth, the upturn in the real estate market and monetary loosening could help reduce pressures on corporates and local governments by easing their liquidity constraints in the very short term.
- However, their solvency is not improving, their debt levels have become even more excessive over the last year and their capacity to service their debt remains weak.
- In this context, credit risks in the financial sector continue to increase and the performance of commercial banks deteriorates gradually.
Corporates breathing a little easier
Signs of economic growth stabilisation that appeared in March 2016 have persisted. After bottoming out in January and February, industrial production growth has remained above 6% in year-on-year terms (see chart 1). Although this remains very low, the improvement has been accompanied by a slight upturn in the average performance of industrial enterprises. Their aggregate profits have started rising again (+8.4% y/y in the first nine months of 2016) after falling throughout 2015 (-2.3%). Demand for industrial goods has been boosted by monetary and fiscal stimulus measures (which have especially helped infrastructure projects, the real estate market and the auto sector). Commodity prices have rebounded since the start of the year and producer price deflation has eased gradually, eventually turning slightly positive in September (+0.1% y/y vs. -5.9% in December 2015).
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by Christine PELTIER