China: towards a “soft cooling”?!
On Wednesday 17th of April, Chinese officials released a slew of domestic economic data that beat expectations, including the largely anticipated gross domestic product figure. Beijing said its economy expanded by 6.4% on a year-on-year basis in the first quarter of 2019, topping the 6.3% that analysts polled notably by Reuters had expected. This figure remains unchanged from the previous quarter but is well below the figure of the first quarter of 2018 (+6.8%).
The Middle Kingdom also released other economic indicators such as Industrial production which jumped 8.5% on a year-on-year basis in March, widely exceeding the 5.9% estimated by Reuters’ consensus to register the fastest growth since July 2014. Moreover, retail sales grew by 8.7% on a year-on-year basis, beating Reuters’ projection of 8.4%.
While this economic growth figure doesn't seem disappointing, we should keep in mind that the growth target this year is 6-6.5% according to the Chinese government, and the latest first quarter release is already reaching the top end of this target range. For Chinese officials and a plethora of analysts, it is the fiscal and monetary stimulus measures that are behind these "good" figures. However, Beijing should not stop there and should continue to ease its fiscal policy while the People’s Bank of China would withhold further monetary easing to avoid accumulating debt again.
Julien Moussavi, Head of Economic Research
Source: Beyond Ratings, IMF