China: First signs of support kicking in – ABN AMRO

According to Arjen van Dijkhuizen, Senior Economist at ABN AMRO, China’s recent data point to a further gradual weakening of momentum, but there are signs that policy easing is starting to kick in.

Key Quotes

“In line with our expectations, investment growth picked up to 5.8% yoy ytd in October (September: 5.4%). That mainly reflects the recovery of stated-led investment on the back of fiscal easing policies.”

“Over the past months, Beijing ordered local governments to issue more special purpose bonds to finance local infrastructure projects, while the banking supervisor cut risk weights for local government bonds. Industrial production edged up marginally, to 5.9% yoy (September: 5.8%). By contrast, retail sales slowed to 8.6% yoy (September: 9.2%), the slowest pace in five months. That likely reflects some statistical factors, such as the timing of the mid-autumn festival holidays and possibly some households holding back spending in the run-up to ‘Singles Day’ on 11 November.”

“All in all, Bloomberg’s monthly GDP estimate continued its gradual decline, falling to 6.6% yoy in October.”

“We expect the PBoC to continue taking measures to prop up lending, including further cuts of bank RRRs.”