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China to witness investment led growth rebound in Q4 – Deutsche Bank

FXStreet (Delhi) – Chief Economist, Zhiwei Zhang of Deutsche Bank, suggest that on the back of yesterday’s Chinese GDP data, there are signs from some of the leading indicators that seem to suggest that there will be an investment-led growth rebound in Q4.

Key Quotes

“In particular, the notable developments include both a strong pickup in floor space starts in the property markets and secondly an improvement of the fiscal situation. On the property market, floor space starts strengthened in September with monthly growth at +15.3% yoy, which compares to -16.7% and -21.3% in August and July respectively.”

“Meanwhile, government revenues improved on the back of the land sales recovery. Local government land sales revenues declined only -27.2% yoy in Q3, better than the -36% in Q1 and -41% in Q2. As a result, general government revenues dropped only -0.5% yoy in Q3, also better than the -3.6% in H1 2015.”

“Zhiwei also points out that there were stronger government expenditure numbers last quarter. Added to this, strong new RMB loans and new total social financing in September are also indicating a possible recovery of investment in Q4.”

“As a result, Zhiwei reiterates his view that GDP growth will pick up modestly in Q4 to 7.2%, led by an investment recovery. With regards to monetary policy, he does not expect an IR cut until the end of 2016, but expects one RRR cut this quarter followed by one for each quarter of 2016. On the FX front, Zhiwei believes that the CNY rate will remain stable at around 6.4 this year, before depreciating modestly to 6.7 by the end of 2016.”

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