UOB Group’s Suan Teck Kin, CFA, and Economist Ho Woei Chen, CFA, reviewed the recent Chinese trade data and assessed the prospects on economic growth.
Key Quotes
“China’s exports (in USD terms) improved in Oct with a decline of -0.9%y/y compared to -3.2% in Sep and market expectation of -3.9%. Imports declined at a slower pace of -6.4%y/y in Oct, from -8.5% and expectation of -7.8%. As a result, overall trade balance improved to US$42.81bn, from US$39.65bn in Sep”.
“YTD, China’s exports and imports (USD terms) registered contractions of 0.7% y/y and 5.1% y/y, respectively, deepening from the -0.5% and -4.9% YTD declines in Sep. In CNY terms, China’s exports gained by 2.1%y/y, reversing from the -0.7% decline registered in Sep while imports shrank -3.5%y/y from the -6.2% drop in Sep”.
“While there have been increased intensity of news headlines of progress towards the conclusion of a “phase 1″ US-China trade deal, it should be noted that main issues such as the rolling back of trade tariffs remain uncertain at this stage. In addition, this could be just one phase of a multiphase trade pace that could drag on for sometime. As such, this uncertainty as well risk of a breakdown in negotiations remains a concern which would continue to weigh on sentiment”.
“With existing tariffs remaining in place, we keep our full-year growth forecast for China at 6.1% in 2019 and 5.9% in 2020. We expect to see conitnued weakness in China’s economic data in the near-term. This includes the upcoming release of the 3Q19 GDP (18 Oct) which we forecast at 6.0% y/y vs. 6.2% in 2Q19. This should see Chinese policymakers continue to maintain a measured pace of proactive fiscal and monetary easing, the latest of which saw the 1Y Mediumterm Lending Facility (MLF) rate nudged down by 5 bps recently”.
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