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Arjen van Dijkhuizen, senior economist at ABN AMRO, points out that at the start of China’s annual National People’s Congress traditionally held in early March, Prime Minister Li Keqiang revealed a growth target of 6.0-6.5% for 2019, compared to ‘around 6.5%’ for 2018, in line with ABN AMRO’s expectation and fits with their growth forecast for 2019 (6.3%, slightly above consensus).

Key Quotes

“The government also confirmed it would continue with targeted easing to stabilise the economy by announcing further cuts in taxes and fees, raise infrastructure investment and support lending to private firms/SMEs. The proposed tax cuts worth CNY 2 trn (around 2% of GDP) are larger than the cuts implemented last year and are primarily coming in the form of VAT cuts for the manufacturing, transport and construction sectors.”

“On the monetary policy front, we expect Beijing to continue with piecemeal easing, while refraining from large-scale stimulus. Beijing is still constrained by longer-term goals, such as stabilising macro leverage and tweaking China’s growth model, to safeguard long-term growth and prevent potential rating downgrades.”