China: Early signs of green shoots – Nordea Markets

According to Amy Yuan Zhuang, chief analyst at Nordea Markets, China’s better-than-expected GDP numbers show stabilisation of the economy, but it’s too early to call for a turnaround.

Key Quotes

“The Chinese economy showed welcoming signs of stabilisation in Q1, thanks to increased government stimuli. GDP growth was 6.4% y/y, on par with the last quarter and beating both our and consensus expectation. However, the quarterly numbers offer another perspective. The economy grew by 1.4% q/q, lower than 1.5% in Q4. This indicates that growth momentum had indeed suffered at the beginning of this year.”

“Other growth barometers, such as industrial output, fixed investments and retail sales, have all exceeded expectation for March. Together they paint a much brighter macro picture for China and help easing growth concerns. Nevertheless, it is too early to declare a convinced turnaround of the economy.”

“Today’s numbers support our financial forecasts. While we think the authorities will maintain an accommodative stand on growth policies, there is currently no need to cut the benchmark interest rates, which stand at 4.35% for one-year lending rates and 1.5% for one-year borrowing rates.”

“The improved macro numbers support our call for no sharp movements of the CNY/CNH against the USD in the near term.”

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