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China: Sub-7% GDP growth point towards moderating growth momentum - Nomura

FXStreet (Delhi) – Research Team at Nomura, note that the China’s real GDP growth ticked down to 6.9% y-o-y in Q3 from 7.0% in Q2, slightly better than expected (Consensus: 6.8%; Nomura: 6.7%), while nominal GDP growth weakened much more significantly to 6.2% from 7.1%.

Key Quotes

“The slightly-better-than-expected GDP growth may have had some help from an extra contribution from the financial sector as turnover and market value of the equity market was still much higher on a year-over-year basis. However, the drop in growth in the non-financial sectors, particular secondary industry, seems to be much larger.”

“September activity data point to weaker monthly growth momentum. Industrial production growth moderated significantly to 5.7% y-o-y from 6.1% in August, the weakest level in six months (Consensus: 6.0%; Nomura: 5.9%) and fixed asset investment growth slowed to 10.3% y-o-y (ytd) from 10.9% (Consensus: 10.8%; Nomura: 10.7%). The weakness was largely due to sluggish property investment (2.6% from 3.5%), manufacturing investment (8.3% from 8.9%) and a slowdown in infrastructure investment (excluding electricity, 18.1% from 18.4%).”

“The silver lining is that the economic rebalancing continued in September, with nominal retail sales growth rising to 10.9% y-o-y from 10.8% in August (Consensus: 10.8%; Nomura: 11.1%). Real retail sales growth also rose to 10.8%, from 10.4%.”

“Looking ahead, we see some nascent signs of growth stabilisation in the non-financial sector driven by fiscal stimulus that is already underway, but no evidence of a durable rebound in the coming months.”

“We continue to expect moderate fiscal stimulus from the central government and continued monetary easing, with one more bank reserve requirement ratio cut in Q4 and another four in 2016 (each by 50bp), together with two more benchmark interest rate cuts (each by 25bp) in 2016.”

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