China: Stimulus working? – ABN AMRO

According to Han de Jong, Chief Economist of ABN AMRO, underlying slowing of the Chinese economy may be an important factor in the slowing of world trade growth and in the growth rate of the industrial sector in many countries.

Key Quotes

“Bear in mind that many Chinese data do not support that theory as they have remained relatively robust. It is clear, however, that Chinese policymakers have changed direction in recent months, putting less emphasis on deleveraging the economy and more on providing support for growth.”

“Whether they are doing that because the economy may have slowed more than they are willing to tolerate or whether they are, proactively, trying to compensate for possible negative effects of the trade conflict with the US is not clear. Perhaps it is a bit of both.”

“In any event, it is clear that public investment growth has slowed very significantly since the middle of 2016. That seems to be a reflection of the policymakers’ efforts to deleverage.”

“The more recent efforts to support the economy may be starting to produce results. Growth of public investment has picked up recently. In addition, the growth rate of investment in fixed assets in manufacturing has accelerated since March, when the yoy growth rate amounted to 3.8%. The October number was 9.1%.”