China: After 6% GDP growth in 3Q, we raise our 4Q forecast – ING

China’s economy grew at the target rate of 6% in the third quarter, and despite uncertainty over the trade war, we are raising our forecast for fourth-quarter growth, Iris Pang – Economist Greater China at ING – wrote in a note this Friday.

Key Quotes:

The main growth driver was still infrastructure projects. These projects have moved from the investment stage to the production stage. We expect infrastructure projects to continue to be the central pillar of growth in the fourth quarter.
 
There is another CNY1 trillion yuan from the local government special bond quota, borrowed from next year, to be used until the end of 2019. These bonds are the source of financing for infrastructure projects. As such, both investment and industrial production will continue to rely on infrastructure.
 
This will mark even bigger differences between private and public sector growth. The private sector will continue to suffer from the scaling down of factory activity due to the US tariffs. This will add even more uncertainty in terms of job security and salary growth which, in turn, will put pressure on consumption, even if substantial public sector growth acts to counter these negative pressures.
 
The good news is that we expect 5G infrastructure, production and services to start to make a visible contribution to the economy from the fourth quarter. Although it is still uncertain how much 5G can help China’s exports, domestic usage of 5G alone should offer good support to the economy.
 
We are raising our forecast for 4Q19 GDP growth from 5.8% to 6.0%. As such, our GDP growth forecast for the whole of 2019 will be 6.15%.