9 May 2016
China: The economy’s L-Shaped growth path – ING
Tim Condon, Chief Economist at ING, suggests that a People’s Daily article has people thinking that further stimulus is off the table and ING is reviewing their forecast of two more 25bp PBOC policy rate cuts.
Key Quotes
“In an interview with the People’s Daily on the economy the authorities said the economy’s path “cannot be U-shaped, cannot be V-shaped but will be L-shaped. I want to emphasize that this is an L-shaped stage, not just a year or two. For the next few years, the coexistence of weak demand and overcapacity make it hard for the economy to grow rapidly.”
Asked about the rebound in fixed asset investment growth in the first quarter and whether short-term stimulus was still in play the authorities answered that they were adhering to proactive fiscal policy and prudent monetary policy but that they were “unswervingly [promoting] supply-side structural reforms as the main line.”
Financial markets are reading the story as indicating that further stimulus is off the table. We are reviewing our forecast of two 25bp PBOC policy rate cuts in the rest of the year (Bloomberg consensus is one 25bp cut).”
Key Quotes
“In an interview with the People’s Daily on the economy the authorities said the economy’s path “cannot be U-shaped, cannot be V-shaped but will be L-shaped. I want to emphasize that this is an L-shaped stage, not just a year or two. For the next few years, the coexistence of weak demand and overcapacity make it hard for the economy to grow rapidly.”
Asked about the rebound in fixed asset investment growth in the first quarter and whether short-term stimulus was still in play the authorities answered that they were adhering to proactive fiscal policy and prudent monetary policy but that they were “unswervingly [promoting] supply-side structural reforms as the main line.”
Financial markets are reading the story as indicating that further stimulus is off the table. We are reviewing our forecast of two 25bp PBOC policy rate cuts in the rest of the year (Bloomberg consensus is one 25bp cut).”