Iris Pang, economist at ING, suggests that Chinese economy will need to be driven by stimulus and will continue to keep an eye on the retail sales data, and the development of 5G to see if they need to fine tune their forecasts.
Key Quotes
“We expect that infrastructure stimulus will double from 2 trillion yuan to 4 trillion yuan to fill the gap of lost exports and related supply chain disruption. Infrastructure stimulus will keep the economy growing at 6.3% in 2H19.”
“The People’s Bank of China must make targeted cuts to Reserve Requirement Ratios and cut the 7-day interest rate to limit the upward pressure on interest rates brought about by the additional loan demand from infrastructure projects.”
“We maintain our forecasts that the PBoC will make a targeted RRR cut of 0.5 percentage points with the 7-day rate cut by 5bp in 3Q and 4Q, respectively.”
“USD/CNY will be fairly stable around the 6.90-6.95 level. Depreciating the yuan can do no good for exporters who may loss the whole export orders if there is a 25% tariffs or they simply can’t do businesses with US companies.”
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