The China Economic Slowdown Has Arrived – More Weakness in First Half of 2019
While the Chinese policy response continues, the outlook for the economy is still slower growth in 2019 and 2020. More evidence is indicates that the ongoing slowdown will be entrenched in 1H brought down by a ongoing demand shock to the credit downcycle and the end of the front-loaded exports. The property sector is starting to cool and overall, the Chinese government is firing policy supports along the way. As risks continue to stack up, Beijing answers with more policy and stimulus. The People`s Bank of China PBoC delivered a 100 basis point RRR cut in January. These points are all issues that the Chinese government will address.
Keep in mind that as the economy slows, the government will use the Central Bank and other tools to “give the economy a boost” as the US China Trade War takes its toll by slowing down the manufacturing sector – in short, China produces less because it exports less. This makes factories idle and less pay to workers…..please keep reading.
The PBoC added a single-day record high liquidity to the banking system in the form of open market operations. It has also addressed one issue and that is to improve the banks capital adequacy conditions.
China GDP is expected to fade as exports are falling fast. Export growth should continue lower as January minus 5.8% yoy from minus 4.4% in December. The previous front-loading has now come back and it showing up in the most recent figures. Also, as the economy slows there will be generous injections of liquidity into the system.