2019年第三季度中国经济概览（英文版）_50页_2mb

China Economy in Q3 2019 Summary

Core Content

The China economy in Q3 2019 experienced a slowdown, with the real GDP growth rate hitting 6.2% y/y, the lowest in at least 27 years. This slowdown was driven by weaker domestic demand and external headwinds, particularly the ongoing US-China trade tensions. Despite this, the economy showed resilience in domestic consumption, supported by tax cuts and moderate monetary policy.

Key Highlights

• Real GDP Growth:

  • 6.2% y/y in Q2 2019, the weakest in 27 years.
  • Slowed from 6.4% y/y in Q1, due to policy shifts towards high-quality growth and uncertain external environment.

• Industrial Production Index (IPI):

  • Rose by 5.6% y/y in Q2, decelerating from 8.5% y/y in Q1.
  • Manufacturing PMI fell below 50 to 49.4 in May, indicating weakness in the sector, while services PMI remained strong at around 54.

• Consumer Confidence:

  • Increased by 7.7% y/y in Q2, showing relatively positive sentiment despite trade tensions.
  • Business confidence declined by 4.2% y/y, indicating pessimism in the business sector.

• Inflation:

  • Headline CPI rose to 2.63% in Q2, up by 0.8 pp from Q1.
  • Core inflation (excluding food and energy) was 1.63%.
  • Food price inflation was 7.4%, driven by pork prices due to African Swine Fever and fruit prices due to supply shocks.
  • PPI increased by 0.5% y/y in Q2, but most subsectors experienced deceleration, with ferrous metal and farm products being exceptions.

• Trade:

  • Trade surplus widened to USD 106.47bn in Q2, up 12.3% y/y.
  • Exports dropped by 1.5% y/y, while imports fell by 3.9% y/y.
  • Trade tensions negatively impacted net exports, which contributed 1.2% y/y to GDP in Q2.

• Real Estate Investment:

  • Grew by 10.4% y/y in Q2, slightly lower than 11.8% y/y in Q1.
  • Residential property prices in 70 cities remained stable, with a y/y growth of 1.0% in August.
  • The Politburo indicated no further real estate stimulus and emphasized structural reforms.

• Fixed Asset Investment (FAI):

  • FAI growth remained around 6% y/y, in line with the long-term downward trend.
  • Private FAI was 5.3% y/y, lower than state FAI at 7.3% y/y.

• Monetary Policy:

  • RRR was set at 11%, with room for further cuts.
  • MLF one-year rate hovered around 3.3%.
  • DR007 (seven-day repo rate) was 2.66%, up from 2.69% in Q1.
  • M2 grew by 8.5% y/y, while M0 grew by 4.4% y/y.

• Exchange Rate:

  • USD/RMB depreciated by 2.08% from 6.73 to 6.87 in Q2.
  • RMB index fell from 95.04 to 92.89.

• Stock Market:

  • The Shanghai Stock Exchange Index fell by 10.8% in May due to trade tensions.
  • The CSI 300 Index increased only 2.6% in May, down from 17.3% in April.

Economic Outlook

• The CEIC Leading Indicator continued its downward trend, suggesting lower growth for at least the next quarter.
• The IMF and Focus Economics forecast 6.2% y/y GDP growth for 2019, down from 6.6% y/y in 2018.
• The UNESCAP forecasted 6.3% y/y GDP growth for 2019.
• Fiscal deficit is expected to reach 6.12% of GDP, the largest since 1995.
• Current account balance is expected to stabilize at 0.3% of GDP.

Structural Reforms

• Structural reforms in the social security system and rural land market are expected to narrow the urban-rural wealth gap and boost rural consumption.
• Efficient structural reforms in the financial market could improve business confidence.
• The government is expected to implement more active fiscal policies, including additional tax cuts, VAT refunds, and infrastructure spending.

Summary of Key Data

Conclusion

The Chinese economy in Q3 2019 is characterized by a slowdown in growth, mixed inflation signals, and moderate monetary and active fiscal policies. The trade war with the US and global economic slowdown are significant external headwinds, while domestic consumption remains relatively robust. The government's focus on structural reforms and prudent monetary policy is expected to stabilize the economy and improve business confidence in the long term.