Global Macro Service > Research Briefings > China
Amid trade tensions with the US and subdued sentiment, China’s economy has slowed significantly. Industrial activity has weakened especially, while the consumer-service sector nexus has held up better. The fact that growth of activity and credit have continued to slow despite policy easing has led to concerns about the “policy transmission mechanism”.
But the move to a more growth-supporting policy stance is now gaining momentum. While we continue to expect a relatively restrained easing, the Central Economic Work Conference and the recent flow of measures indicate a move to a more expansionary stance and efforts to improve the “policy transmission mechanism”.
That said, we think policymakers will aim to halt the slowdown in growth, rather than try and engineer a significant pick-up in growth. We project a bottoming out of y/y GDP growth around Q2 in response to the growth-supporting measures.
One key question mark is the trade conflict with the US. We think that the chance of further suspensions of tariff hikes has risen. A substantial suspension would imply an upside risk to growth. Domestically, the key risk is a downside one – that credit growth does not pick up.
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