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Arjen van Dijkhuizen, senior economist at ABN AMRO, suggests that for Chinese policy makers, ‘mixed signals’ are pretty much business as usual, given that various policy makers have different roles and backgrounds.

Key Quotes

“What is clear is that, with the Chinese economy facing headwinds from previous financial deleveraging and the trade conflict with the US, Beijing has put macro-economic stabilisation at the top of the priority list while (financial) deleveraging has been shifted down.”

“At the same time, Chinese policy makers are still constrained by longer-term goals, such as stabilising leverage and tweaking China’s growth model to safeguard long-term growth and prevent future rating downgrades. That explains why policy support is not coming in ‘big bazooka’ style, but rather is being unfolded by means of a wide range of smaller targeted fiscal and monetary easing steps.”

“We expect the piecemeal easing approach to continue. That said, it seems that the shift from financial deleveraging to targeted easing has started to filter through, for instance in overall credit growth.”

“All in all, China’s economy has slowed, but we expect economic growth to stabilise in coming months as headwinds are ebbing.”