The Global Macro Outlook:China’s ongoing growth fade in 2017

Global real GDP growth is forecast to remain in “the long grinding cycle”of 2.5-3.0% pa, chart below, but has moved from near the lower bound to nearthe upper bound. Our 2016, 2017 and 2018 global real GDP growth forecastsare 2.6%, 3.0% and 2.9%, respectively.

Further upside is constrained by a maturing industrial recovery, debt structureswhich are limiting growth globally, and the ongoing China growth fade. Thisunderpins our fair-value cycle high US 10-year bond yield forecast of 2.7%.

For China’s policy-makers, the most important issue in 2017 is the ongoingpolitical transition, the overhaul of the current political governance structure.

Unsurprisingly, a stable economic backdrop is desirable. After 6.7% real GDPgrowth in 2016, we forecast 6.5% this year and 6.0% in 2018, pages 2-4. SinceChina is entering a property down-cycle, the economy will experience strongerheadwinds in the months ahead.