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Iris Pang, economist at ING, notes that China’s new orders grew slower to 50.4 in the month, down from 50.8 a month ago, while new export orders were still gloomy at 47 but edged up from 46.9.

Key Quotes

“It shows that stimulus  on infrastructure projects has come in later than expected. The come back of local government financial vehicles should mean that stimulus via infrastructure projects is on the way.”

“We also expect that the government is going to cut import tariffs on more goods. This will reduce production costs in the manufacturing sector. But we expect new export orders to keep contracting as long as the trade war continues, not to mention that the trade war tension could escalate after this weekend’s meeting between President Xi and President Trump.”

“A slowdown in non-manufacturing activities is a concern. As fiscal stimulus is on the way, we believe that both manufacturing and non-manufacturing activities should be steady from here. Our estimate of the size of fiscal stimulus is around CNY9-10 trillion for late 2018-2020, ie, averaging CNY4 trillion each year in 2019 and 2020.”

“As such we keep our GDP forecast at 6.3% in 2019 from 6.6% in 2018.”