• China's Economy and Exports

China's Economy and Exports (Photo : Getty Images)

China's economy has obviously improved, with strong performance posted in the first three months of the year, amid concerns over market volatility, according to Goldman Sachs.

A recent portfolio strategy research report by Goldman Sachs said, "Investors across mandates are of the view that the fundamental backdrop for China macro has noticeably improved," as cited in an article by valuewalk.com.

Like Us on Facebook

Goldman forecast on China's economy has remained bullish as it released its report last week following the country's strong economic performance in the first quarter, and investors have improved their outlook on China from their previous skeptical stance.

Goldman Sachs said in its report: "A combination of solid 1Q macro statistics (11.8 percent nominal GDP growth, 7.5 percent PPI), 28.3 percent year-on-year growth in January to March industrial profits, and 21 percent year-on-year growth in 1Q17 earnings for listed companies seems to have resulted in a broad agreement among investors that the fundamental backdrop for Chinese assets has meaningfully improved versus the last few years when deflation/disinflation was pressuring aggregate corporate profitability."

Goldman's analysts, however, noted that economic stability and monetary tightening have eased investor concerns that resulted in the country's strong economic performance.

But despite this, the rise in PMIs and inflation indicators show the slowing of the economy, as an increase in interbank market rates may tighten short-end rates that could pressure the domestic bond market and equities.

While this strong economic performance has eased some of the investor concerns surrounding China's economy, Goldman's analysts note that two trends in the region are currently weighing on sentiment--notably, a further moderation in economic growth and monetary tightening.

Goldman further noted that "these issues are receiving much less attention now from investors globally than in anytime over the past couple of years," although the report said that investors are into "discussions about the end-game of a debt-fueled growth model, fading credit impulse, property market bubble (especially in higher tier cities), and FX/capital controls."

Generally, Goldman's assessment shows that China's economy and its equity market have improved dramatically over the past year, the report said.