China: Trade war puts recovery at risk – Danske Bank

In view of analysts at Danske Bank, China’s growth recovery is likely to be delayed by further trade war escalation, but stimulus is set to cushion the drag from higher uncertainty.

Key Quotes

“We look for growth to fall to 6.2% in 2019 from 6.6% in 2018. In 2020 we expect the economy to grow 6.1%.”

“We look for a trade deal in H2, which should pave the way for a recovery in Q4. Uncertainty is elevated, though, and an all-out trade war that runs into 2020 would delay any lift to growth.”

“We expect more policy stimulus with a further cut in the RRR and subsidies for consumer goods. USD/CNY to rise to 7.10 over the next quarter.”

“China is set to face some headwinds from production moving to other Asian countries and US export controls in tech. China's likely response will be more focus on self-reliance, even more investments in the tech industry and new efforts to create a better business environment for foreign companies in order to attract FDI.”

“China has stepped up measures to support the private sector and continues to highlight 'reform and opening'. We expect China to stay on a catching-up path and to surpass the US economy by 2030.”

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