China | Risk pendulum shifts to a fast growth slowdown

A batch of November economic indicators is announced today, together with previously released trade and credit data,
suggesting growth slowdown is faster than market expectation despite the recent easing measures. A confluence of
factors weighs on growth, including the dampened confidence from China-US trade tensions, the faded effect of
previous front-loading exports and persistent tightening of domestic deleveraging. In the upcoming Central Economic
Work Conference next week, the authorities are likely to send out more signals of easing monetary and fiscal policy.
The growth in 2018 can still meet its official target of 6.5% given the good outcome in 1H. Nevertheless, we expect
growth pressure to persist through 2019 and drag GDP growth towards our projected 6%.
Nov economic indicators are below expectations: industrial production decelerated from 5.9% y/y to 5.4% y/y, lowest
since 2008; retail sales significantly dropped to 8.1% y/y from 8.6% previously, lowest since 2003, which is mainly
driven by sharp dip of auto sale. The only silver lining is that fixed asset investment increased to 5.9% ytd y/y from 5.7%
previously, indicating investment was supported by the recent easing measures. (Table 1; Figure 3-8)
Nov credit data is unsatisfactory despite the authorities’ monetary easing measures, as the monetary transmission
mechanism is still weak. M2 growth remained low at 8% y/y as of the previous month. Although new yuan loans and
total social financing surged from the last month’s readings, it is mainly due to the expansion of bank acceptance
business. Altogether, MICA model yields a monthly GDP prediction at 6.5%, in line with growth slowdown. (Figure 2)

Fuente: BBVA

Leer más Informes de:

Comercio Exterior Economía Internacional