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Christin Tuxen, chief analyst at Danske Bank, suggests that China is preparing for a continued slowdown in growth as ahead of the National People’s Congress, Chinese premier Li made a series of announcements overnight.

Key Quotes

“First, the Chinese authorities released new GDP growth targets, which were lowered to the 6.0-6.5% range for 2019 (vs 6.5% for 2018), i.e. accommodating a continued deceleration in growth. At the same time, it was also underlined that ‘prudent’ monetary policy and ‘proactive, stronger, and more effective ‘fiscal policy will be pursued going forward with a target budget deficit of 2.8% of GDP (vs 2.6% last year).”

“Further, VAT cuts were announced and significant tax relief was pledged for the industrial sector with tax and social security fees set to be reduced by CNY2tr.”

“On the whole, this suggests that China is preparing for a continued slowdown in growth, but also that the Chinese authorities remain ready to stimulate to avoid a hard landing, even with a trade deal in sight.”