Amy Yuan Zhuang, Chief Asia Analyst at Nordea Markets, explains that the trade war with the US has taken its toll on China’s macro momentum as the Chinese GDP growth fell to 6.5% y/y in Q3, the lowest growth rate since Q1 2009.
Key Quotes
“This is consistent with our forecast and below consensus expectation of 6.6%. Aggregate growth for the first three quarters this year is 6.7%. We expect moment to take another dive in Q4, as the trade tensions show no signs of abating. Thus, the government likely needs to continue stimulating domestic demand to deliver the 6.5% growth target for this year.”
“The first and most visible pain from the trade war is on the export sector, which has already reported dwindling sentiment.”
“External headwinds will likely spill over to suppress domestic manufacturing activity. Industrial production grew by 5.8% y/y in September, the slowest pace since February 2016.”
“Investment growth has picked up slightly, driven by strong growth in manufacturing and real estate investment. Overall investment appetite will likely remain favourable and infrastructure investment is expected to rebound as credit conditions improve. Both bank loans and local government bond issuances have accelerated in September.”
“Moreover, the housing market is still in tailwinds.”
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