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China: Policy challenges remain in place - ING

FXStreet (Delhi) – Prakash Sakpal, Economist at ING, suggests that the Chinese policy challenge remains trying to support manufacturing growth and prevent its slowdown from spreading to the services economy.

Key Quotes

“The November data dump starts. The very first of the November data, the manufacturing PMI, portrayed continued weak activity and prompted us to have our 7.0% 4Q15 GDP growth forecast under review for a downgrade. We expect nothing in this week’s data – trade, inflation and monetary aggregates and foreign exchange reserves are due – to alter that picture.”

“Trade data are due tomorrow. The consensus forecast for the USD-value export growth is -5.0% YoY and import growth is -11.8% (prior -6.9% and -18.8% respectively). Forecast for trade balance is $64.15 billion surplus, which would be the record surplus.”

“The slowdown in the volume of world trade this year is associated with a step-down in China’s exports growth to -2.1% YoY YTD through October from 6.0% in 2014. We attribute the slowdown to 2H14 commodity price crash. Export growth may turn positive in early 2016 when the crash period moves into the base of comparison. However, we don’t think growth will bounce back to the mid-single-digit pace of 2012-14.”

“We expect macro policy to remain accommodative through 2016. The policy challenge remains trying to support manufacturing growth and prevent its slowdown from spreading to the services economy, in our view.”

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