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More fiscal support as expected but no massive stimulus for China

Summary:
The Chinese government set new economic targets and policy announcements for 2019, broadly in line with what we had been expecting.The new economic targets for 2019 and policy announcements are broadly in line with our expectations. They generally reflect Chinese policymakers’ intention to support growth in the face of economic headwinds but to avoid massive stimulus.The target for real GDP growth for 2019 was lowered to a range between 6.0% and 6.5%, from “around 6.5%” in 2018 and 2017, suggesting Beijing is fully aware of the headwinds the economy is facing in the near term.M2 and total social financing (TSF) are expected to grow in line with nominal GDP growth, while monetary policy should remain prudent.Additional tax cuts were announced, as expected. The total reduction in taxes and

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The Chinese government set new economic targets and policy announcements for 2019, broadly in line with what we had been expecting.

The new economic targets for 2019 and policy announcements are broadly in line with our expectations. They generally reflect Chinese policymakers’ intention to support growth in the face of economic headwinds but to avoid massive stimulus.

The target for real GDP growth for 2019 was lowered to a range between 6.0% and 6.5%, from “around 6.5%” in 2018 and 2017, suggesting Beijing is fully aware of the headwinds the economy is facing in the near term.

M2 and total social financing (TSF) are expected to grow in line with nominal GDP growth, while monetary policy should remain prudent.

Additional tax cuts were announced, as expected. The total reduction in taxes and fees is expected to reach Rmb2trn in 2019, compared to Rmb1.3trn already achieved in 2018. However, the fiscal deficit target for 2019 is only moderately higher than last year, indicating overall fiscal stimulus may not be as large as many have expected.

In the absence of any major surprises, our near-term economic outlook for China is unchanged.

More fiscal support as expected but no massive stimulus for China

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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