China | Growth moderation amid trade war risk MAY 2018

April economic indicators announced today point to an expected moderation in growth. In particular, fixed asset
investment and retail sales both dropped from the previous readings, although industrial production maintained its
momentum. This suggests that growth headwinds remain in place, mainly from domestic tightening policy initiatives
and trade skirmishes with the US, although the latter of which, in our baseline scenario, is unlikely to evolve into a fullblown
trade war between the largest country economies in the world. That being said, the growth is most likely to
moderate through the rest of the year. Thus, we maintain our 2018 growth projection at 6.3% y/y, compared with the
official target rate at 6.5% and the Bloomberg consensus at 6.5%.
April indicators are mixing: FAI decreased to 7% ytd y/y from 7.5% ytd y/y previously (consensus: 7.4% ytd y/y),
indicating investment slowed down due to financial tightening; retail sales also decelerated to 9.4% y/y from 10.1% y/y
in the previous month (consensus: 10% y/y). By contrast, industrial production significantly picked up to 7% y/y from 6%
y/y previously (consensus: 6.4% y/y). The authorities also reported the survey unemployment rate of April, which
marginally decreased to 4.9% from 5.1% previously, lower than the target rate of 5.5%. (Table 1; Figure 3-8)
April credit has picked up: M2 growth marginally increased to 8.3% y/y from 8.2% y/y in March. In addition, total social
financing and new yuan loans also increased to RMB 1,560 billion and RMB 1180 billion, respectively. Altogether, our
MICA model yields a monthly GDP prediction at 6.9%, in line with the previous month’s prediction. (Figure 2)

Fuente: BBVA

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