macro outlook
June 22, 2019

More Steps toward Financial Openness with London-Shanghai Connect

Growth is facing downward pressure. Industrial output rose 5% y/y, down 0.4 pps from April, reaching a new low rate. Investment rose 4.4% y/y, down 1.3 pps from April. The decrease of investment growth rate is mainly affected by state investment because of fiscal deficit pressure. State investment rose 5.6% y/y in May, down 4.2 pps from April. In May, fiscal revenue fell -2.1% y/y, down 7.4 pps from January-April, putting further constraint on state investment. Real estate cooled further.

Retail sales of social consumption goods were up 8.6% y/y in May in nominal terms. The adjusted growth…

March 24, 2018

Growth Targeted at About 6.5%

Prime Minister Keqiang Li announced during a March 5th address to the People’s Congress of Beijing that China’s growth target for 2018 would be about 6.5%, the same as in 2017, when growth reached 6.9%. The yuan will be “basically stable” at a reasonable level, Li also predicted. More local government debt will be cut, but not at the cost of infrastructure. Moreover, reducing financial risk will be key for the regulatory agency, an emphasis further confirmed by new Central Bank governor Gang Yi, who took office after Xiaochuan Zhou’s 13 years of service.

Only three days after the People’s…

December 26, 2017

Narrowing the External Imbalance

Growth remained stable in November, with industrial output up 6.1% y/y. Fixed asset investment excluding agriculture was up 6.3% y/y, up 0.5 pps from October, and up 2.4 pps from its August nadir. However, the current investment growth rate is still lower than investment goods’ price growth rate, indicating that real investment growth is still negative, by -0.2% y/y.

National fiscal revenue fell -1.4% y/y, turning negative for the first time this year. Since current investment strength is mainly government driven, the fall of fiscal revenue will constrain a possible investment rebound. Retail…