The Chinese economy was stabilised with another dose of monetary and fiscal easing in 2016, but the imbalances – credit growth that is too strong and opaque, inefficient state-owned enterprises and a bubbly housing market – have hardly been addressed. Thus, our structural worries about China remain. We think that economic growth in China is still structurally on a slowing trend.

Most recently the authorities have applied some targeted monetary tightening, directed in particular at the more shadowy part of the financial system. As a result, credit growth has slowed substantially as have some leading and real economic indicators.

We think economic stability is paramount for the Chinese leaders, with an important Plenum of the Communist Party coming up this autumn. So any slowdown should be shallow, although it will have an impact on countries exporting to China, such as other Asian countries, but also Germany and possibly even the US.

Part of the reflation narrative was built on Chinese producer prices. After years of deflation, Chinese producer prices have surged this year. This is strongly driven by commodity prices, but not those alone. So, better price developments have been positive for Chinese companies, but also for other exporters in Asia.

For more on the factors affecting emerging market economies, click here.