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China: Growth likely to rebound, no big-bang stimulus from PBoC – Deutsche Bank

FXStreet (Delhi) – Zhiwei Zhang, Research Analyst at Deutsche Bank, expects that China’s growth is likely to rebound in Q4 to 7.2% yoy from 7.0% in Q3 and do not expect the government to announce another grand fiscal stimulus package, as some leading indicators show positive signs.

Key Quotes

“Most headline activity indicators stabilized in August. We believe this was driven to a large extent by fiscal policy easing since mid-May.”

“CPI inflation rose quickly in August, from 1.6 in July to 2.0. There are no signs yet that this is a broad-based picking up, as core inflation remains stable for the moment. But it is worth close monitoring going forward.”

“We believe the fundamental drivers for cash bond market remain favorable and we maintain our modestly bullish view on CNY bonds and rates. We maintain our growth and policy outlook. We continue to expect GDP to grow at 7.0% in Q3 and 7.2% in Q4 (7% in Q2), and quarterly CPI inflation to be 1.8 in Q3 and 2.2 in Q4 (1.4 in Q2). We expect no more interest rate cut in 2015, but one more cut of RRR in Q4. We expect USDCNY closing to be around 6.4 and 6.7 at end-2015 and end-2016, respectively.”

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