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China: Financial sector giving extra contribution to GDP figures - Nomura

FXStreet (Delhi) – Research Team at Nomura, suggest that Chinese financial sector is lending extra hand to country’s GDP growth and as the financial sector’s contribution normalises, we expect GDP growth of 6.4% y-o-y in Q4.

Key Quotes

“A breakdown of GDP data shows that growth of financial services value-added slowed slightly in Q3 to 16.1% y-o-y from 19.2% in Q2. However, this level of growth was still much higher than average (9.3% over 2010-14). We estimate the financial sector contributed about 1.1 percentage points (pp) to the Q3 GDP growth rate, around 0.4-0.5pp higher than normal.”

“This confirms our view that the better-than-expected Q3 GDP growth was partly supported by an extra contribution from the financial sector.”

“We expect the non-financial sectors to stabilise somewhat due to policy easing, but only at a relatively low level. Given that support from the financial sector is likely to fade due to the high base in Q4 last year, we remain comfortable with our real GDP growth forecast of 6.4% for Q4 and 6.8% for full-year 2015.”

“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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