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Chinese growth moderates as expected

Summary:
We expect the authorities to adapt fiscal and monetary policies to deal with downward risks to growth prospects.Chinese GDP for Q2 came in at Rmb22.0 trillion (about USD3.4 trillion), rising 6.7% year-over-year (y-o-y) in real terms. This represents a moderate deceleration from Q1 (6.8% y-o-y), largely in line with our expectations (see chart). For the first two quarters of the year as a whole, the economy expanded by 6.8% compared to the same period last year.The data show that China’s long-term transition towards a service- and consumption-driven economy is well underway, although in the near term household consumption may face more cyclical headwinds. The government’s deleveraging campaign has weighed on the real economy, most notably in the area of infrastructure investment. In

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We expect the authorities to adapt fiscal and monetary policies to deal with downward risks to growth prospects.

Chinese GDP for Q2 came in at Rmb22.0 trillion (about USD3.4 trillion), rising 6.7% year-over-year (y-o-y) in real terms. This represents a moderate deceleration from Q1 (6.8% y-o-y), largely in line with our expectations (see chart). For the first two quarters of the year as a whole, the economy expanded by 6.8% compared to the same period last year.

Chinese growth moderates as expected

The data show that China’s long-term transition towards a service- and consumption-driven economy is well underway, although in the near term household consumption may face more cyclical headwinds. The government’s deleveraging campaign has weighed on the real economy, most notably in the area of infrastructure investment. In addition, rising trade tensions with the US may put more downward pressure on Chinese exports going forward and likely on the broad economy as well.

To mitigate the potential downside risks to growth, we expect the Chinese government to adjust monetary and fiscal policies further in H2 2018.

For the moment, we have decided to keep our full-year Chinese GDP forecast unchanged at 6.6% for 2018 and 6.3% for 2019. But we recognise that the risks are tilted to the downside if the Trump administration’s threats of further tariffs materialise.

About Dong Chen
Dong Chen
Dong Chen is senior Asia economist, Pictet Wealth Management. - Twelve years of working experience in macroeconomic research - Extensive knowledge about asset allocation and multi-asset class portfolios - Rich client-facing experiences with high-net-worth clients across Asia - Rigorous training in economics and comprehensive knowledge about Asian economies and business - Strong analytical skills and solid background in statistical/econometric analysis - Strong communication / presentation skills - Native Mandarin Chinese speaker and fluent in English Do not hesitate to contact Pictet for an investment proposal. Please contact Zurich Office, the Geneva Office or one of 26 other offices world-wide.

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