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World Economy

26

OPEC Monthly Oil Market Report – October 2017

Graph 3 - 25: Chinese GDP growth

Graph 3 - 26: Chinese GDP breakdown

On 18 October, the

Chinese Communist Party (CCP)

will hold its 19th Party Congress in Beijing.

Appointments will be made to the Party’s powerful Central Committee (CC), Politburo and

Politburo

Standing Committee (PSC)

, and the Party will decide on a five-year policy agenda. It seems some

significant economic challenges may be discussed at this Congress such as rural poverty, environmental

degradation and the economic turbulence generated by the “new normal”. China is now transitioning from

export-led economic growth to consumer-driven growth. China’s foreign policy and North Korea are also

other highlighted issues.

In terms of

market liberalisation

, China will release a timetable and roadmap for the opening-up of 12 major

sectors to foreign investment soon. According to the State Council’s release on promoting foreign investment

in August, the 12 sectors include new energy vehicle manufacturing, ship design, banking, securities and

insurance. China's progression towards opening market access to foreign capital has been gradual.

However, at the moment, implementation of the new liberalisation policies will be carried out step-by-step,

and will only apply to Free Trade Zones. Therefore, it is unlikely to markedly change nationwide productivity

in these sectors.

Foreign direct investment

(FDI) in China contracted y-o-y during the first eight months of 2017, while

general purpose equipment, medical pharmaceutical products, raw chemical materials manufacturing and IT

services continued to expand rapidly over the same period. Further liberalisation of market access should

boost FDI in high-end manufacturing and the growing services sectors, but it is unlikely to change the

downward trend of FDI growth in traditional heavy industries.

China’s CPI inflation

rose 1.7% y-o-y in August of 2017, following a 1.4% rise in July, while the market

expected a 1.6% gain. It was the highest inflation rate since January, as the cost of non-food items rose at a

faster pace and the cost of food fell much less than in the previous month.

The

PPI

increased by 6.4% y-o-y, compared to a 5.6% rise in the previous three months. It was the twelfth

straight month of increase in producer inflation and the highest since April.

6.96.9

7.3

6.9

6.7

6.0

6.4

6.8

7.2

7.6

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q

2Q

2014

2015

2016 2017

Sources: China's National Bureau of Statistics and

Haver Analytics.

% change y-o-y

4.4

2.3

0.3

-2

0

2

4

6

8

10

1Q 14

2Q 14

3Q 14

4Q 14

1Q 15

2Q 15

3Q 15

4Q 15

1Q 16

2Q 16

3Q 16

4Q 16

1Q 17

2Q 17

Net exports of goods and services

Gross capital formation

Final consumption expenditure

Sources: China National Bureau of Statistics and

Haver Analytics.

% change y-o-y