Though China’s activity data have been slowing in the second quarter, we remain positive on the outlook for the second semester.
Outflows have been limited despite the depreciation of the yuan, which should compensate for the implementation of trade tariffs. The 25% duties on an additional $16bn of Chinese exports will begin on Thursday, while public hearings for the proposed tariffs on a further $200bn have started this week.
Monetary policy will remain supportive with up to two additional 25 basis points RRR cuts expected until next year, while deleveraging is likely to slow and credit growth to stay strong. As for fiscal spending, the government is likely to support investment.
Gero Jung – Chief Economist – Mirabaud AM