China’s GDP slows further in Q3 – UOB


Economist Ho Wein Chen, CFA at UOB Group, assessed the recent Chinese GDP figures for the third quarter.

Key Quotes

“China’s 3Q 2019 GDP growth slowed further to 6.0% y/y (1.5% q/q SA) from 6.2% y/y (1.6% q/q) in 2Q, a new low on record in the quarterly data series (starting from 1992). This was in line with our forecast but missed Bloomberg’s consensus of 6.1%. Tertiary industry continued to anchor growth while secondary and primary industries registered a moderation in their growth rates”.

“Industrial production and retail sales saw stronger growth in September but fixed asset investment and trade weakened. Jobs creation in the first three quarters registered 10.97 million, nearly achieving the full-year target of more than 11 million. This remains an important indicator that the Chinese government can maintain social stability even as economic growth slows”.

“Accounting for the latest growth print, China’s economy expanded by 6.2% y/y in the first three quarters of 2019. For now, we maintain our growth forecast for China to expand 6.1% in 2019 (4Q19f: 6.0%) and 5.9% in 2020 as trade conflicts with the US continue to pose significant uncertainties to the outlook”.

We expect counter-cyclical measures including accommodative monetary policy, acceleration in infrastructure spending and potential reductions in government tax and fees to cushion the downside risks to growth”.

“The uncertainties in trade talks and risk of further growth slowdown in China to 5.9% next year will continue to drive the gradual USD/CNY rise towards 7.20 by end of this year and 7.30 by middle of 2020 in our forecast”.

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