IMF ups China's growth expectations, cuts US forecasts

The International Monetary Fund (IMF) has revised its China's GDP growth forecast for 2017 and 2018 to 6.7% and 6.4% respectively. This is up from an upgrade made in April to 6.6% and 6.2%. China's growth is expected to continue to be a key driver for a firming recovery of the global economy.

Their World Economic report, which came a few days after China posted stronger than expected second quarter growth, was a reflection of a solid first quarter underpinned by previous policy easing and supply-side reforms. It expects banks to continue to lend to support activity so that authorities can meet a highly publicized target of doubling China's economy by 2020.

"We have seen very strong growth and especially beyond our update, second quarter number of 6.9 percent is also above expectation. So clearly growth is proceeding at pace," IMF's chief economist Maurice Obstfeld said.

"Strong Chinese growth drives growth particularly in Asian region but also throughout the world," Obstfeld added. He also praised China's Belt and Road Initiative as "very important" as it promises not only a lot of useful infrastructure investment but to lower trade cost between very important parts of the world, which promotes international trade and prosperity across the wide stretch of Eurasia.

The IMF did warn against strong credit growth that may come with rising downside risk to medium-term growth.

In May, Berkshire Hathaway's Charlie Munger said, "I do think the Chinese stock market is cheaper than the American stock market. And I do think China has a bright future." At Runnymede we believe there attractive investment opportunities in both the US and China heading into the 2nd half of the year.

Cuts to US forecasts

On the other hand, the IMF now projects that the US will grow at a rate of 2.1% in 2017 and 2018, down from its April forecast of 2.3% and 2.5%. "We have reduced our forecasts for both 2017 and 2017 to 2.1 percent because near-term U.S. fiscal policy looks less likely to be expansionary than we believed in April," wrote Obstfeld. The IMF said economic growth could pick up if the administration implements measures such as tax reform; however it could also fall if Trump's budget, which consolidates many parts of the government as part of an overall spending reduction, is approved. While we do not expect major policy to pass this year, we believe that strong sentiment and fundamentals could push US economic growth higher than IMF forecasts in the 3rd and 4th quarters.

Are you bullish on China or the US? Or both?

Hire a Better Adviser Checklist

Share This Story, Choose Your Platform!

About the Author: Chris Wang

Chris Wang


Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Runnymede Capital Management, Inc.-"Runnymede"), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Runnymede.  Please remember that if you are a Runnymede client, it remains your responsibility to advise Runnymede, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Runnymede is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Runnymede's current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: Runnymede does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Runnymede's web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Search Website

Annuity Review Database

Follow Our Podcast

Google Podcasts
Apple Podcasts

Recent Posts