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17 Apr 2014
Economic conditions in China to stay comparatively weak - NAB
FXStreet (Bali) - Gerard Burg, Senior Economist at National Australia Bank, expects economic conditions in China to remain comparatively weak across 2014.
Key Quotes
"There were few surprises in the latest Chinese data release, with the weakening trends evident since the latter part of last year continuing into the first quarter of 2014, with slower economic growth, comparatively soft industrial production and investment data continuing to point downwards."
"There remains some speculation regarding Government stimulus in response to the weaker performance. Last year’s ‘mini-stimulus’ was critical to the Chinese economy exceeding its growth target, and an April announcement from the State Council regarding investment in rail infrastructure was seen by some observers as the 2014 equivalent. Instead, it appears to be an attempt to encourage private sector investment (via favourable tax treatment to investors) and may not have the same impact."
"For the first quarter of 2014, China’s National Accounts data showed the economy grew by 7.4% year-on-year (slightly ahead of market expectations of 7.3%), continuing to highlight a slowing trend (down from 7.7% yoy growth in the December quarter)."
"We expect economic conditions in China to remain comparatively weak across 2014 – with the Government more focussed on its reform agenda than headline growth. That said, a sharp slowdown could trigger a stimulus response if social stability is threatened. Our forecast remains unchanged at 7.3% this year – with this level close enough to the target rate of ‘about 7.5%’ to satisfy policy makers."
Key Quotes
"There were few surprises in the latest Chinese data release, with the weakening trends evident since the latter part of last year continuing into the first quarter of 2014, with slower economic growth, comparatively soft industrial production and investment data continuing to point downwards."
"There remains some speculation regarding Government stimulus in response to the weaker performance. Last year’s ‘mini-stimulus’ was critical to the Chinese economy exceeding its growth target, and an April announcement from the State Council regarding investment in rail infrastructure was seen by some observers as the 2014 equivalent. Instead, it appears to be an attempt to encourage private sector investment (via favourable tax treatment to investors) and may not have the same impact."
"For the first quarter of 2014, China’s National Accounts data showed the economy grew by 7.4% year-on-year (slightly ahead of market expectations of 7.3%), continuing to highlight a slowing trend (down from 7.7% yoy growth in the December quarter)."
"We expect economic conditions in China to remain comparatively weak across 2014 – with the Government more focussed on its reform agenda than headline growth. That said, a sharp slowdown could trigger a stimulus response if social stability is threatened. Our forecast remains unchanged at 7.3% this year – with this level close enough to the target rate of ‘about 7.5%’ to satisfy policy makers."