China’s GDP seen losing further momentum in 2020 – UOB

Economist How Woei Chen, CFA, at UOB Group assesses the recent GDP figures in China and prospects for this year.

Key Quotes

“In line with our forecast, China’s 4Q19 GDP growth stabilized at 6.0% y/y (3Q19: 6.0%) while q/q SA growth edged higher to 1.5% from 1.4% in 3Q19. For the full year, the Chinese economy expanded by 6.1% in 2019, down from 6.6% in 2018. China’s GDP growth has remained in line with the government’s target of 6%-6.5% through 2019.”

“While secondary industry growth rebounded to 5.8% y/y in 4Q19 from 5.2% in 3Q19, the slowdown in tertiary industry growth to 6.6% (3Q19: 7.2%) which is the lowest on record (data series from 1992) has cast a pall on the outlook.”

“We continue to expect China’s economic growth to slow further in 2020 due to the structural reforms and ongoing supply chain diversification. We are maintaining our growth forecast for 2020 GDP growth at 5.9% (1Q20F and 2Q20F: 5.9%y/y). This would be the slowest growth pace since the low of 3.9% in 1990.”

“Against this backdrop of growth moderation, we expect counter-cyclical measures including accommodative monetary policy, acceleration in infrastructure spending and potential reductions in government tax and fees to be maintained.”