China Bets on More State Control for 2018

As 2017 wraps up and 2018 beckons, it's worth reviewing what we forecast for China in the year now ending, and to cast ahead for what themes might play out over the next 12 months. After this week's meeting of Communist Party leaders at the Central Economic Work Conference, we can expect their targets and objectives for 2018. And these meetings have great import: It was the 2015 meeting that started the ongoing “supply-side reform” campaign.

Last year we focused on a couple of points. First, watch the data, not the New Year's resolutions. While China touts deleveraging efforts, the data is mixed. The debt-to-GDP ratio in China is only up slightly from 2016 to 260 percent, though it is expected to top out at 327 percent in 2022. The moderation was due not to slowing debt growth, but a jump in commodity prices that pushed up nominal gross domestic product. Watch debt growth in 2018: Prices are expected to fall again, raising debt-to-GDP. China still has not given up its debt habit.