Beijing’s plan to contain credit expansion in the world’s second largest economy will be the chief uncertainty for the global economy in 2018 says Andrew Tilton, chief Asia-pacific economist for Goldman Sachs.
Tilton said to Bloomberg that Goldman Sachs is “pretty optimistic about the year ahead,” and that the investment bank still sees “some room to grow in a lot of the world, and in Asia.”
China’s efforts to rein in financial risk and deleverage its economy nonetheless remains “one of the key debates” for the upcoming year.
“The pace at which they decide to move and their ability to implement that gradually is really the key for 2018,” said Tilton.
“China is almost half the world’s investment, so managing that tightening in that area and that gradual investment slowdown is really key, not just for China but for the whole world.”
The mounting debt burden accumulated by China since the Great Financial Crisis is one of the chief concerns for the market, with both Moody’s and Standard & Poor’s citing it as the reason for downgrades of the country’s sovereign credit rating earlier this year.
Researchers from Bloomberg Economics see China’s total debt rising to 327% of GDP by 2022.