News Bureau

Risks to China outlook shift to downside!

Risks to China outlook shift to downside, inked by Arjen van Dijkhuizen & Bill Diviney, Senior economist, ABN AMRO. At China Macro front, April data disappoint over the past few months, various signs of an improving momentum in the Chinese economy where visible, although with some seasonal volatility (e.g. industrial production’s spike in March).

The macro data for April, however, on balance show a less rosy picture. Growth of industrial production and retail sales weakened materially and came in clearly below expectations. Fixed investment growth also slowed a bit, as the policy-driven acceleration of state-led investment was more than offset by weaker private investment.

Import growth was one of the positive exceptions, having returned to positive territory again. All in all,  particularly with a view to the re-escalation of US-China tensions (with higher import tariffs imposed by the US, retaliated by China), we think that risks to our base scenario have shifted to the downside again. Still, we leave our 2019-20 growth forecasts unchanged at 6.3% and 6.0% for now, as we assume a further easing of macroeconomic policies that should offset further drags from the trade conflict (at least partly).

That said, longer term, a permanent breakdown in US-China relations would lead to an erosion of China-US centered supply chains posing additional challenges to future growth.

What's your reaction? 0% 0% 0%