More opening measures amid trade war
The economy continues to weaken. GDP was up 6% y/y in Q3, down 0.2 pps from Q2, and down 0.5 pps from Q3 2018. Investment was up 4.7% y/y, down 0.8 pps from Q2.
Imports were down -2.9% y/y in Q3, down 5.2 pps from Q2, and down 21.9 pps from Q3 2018. Exports were up 3.9% y/y, down 1.8 pps and 6.4 pps from Q2 and Q3 2018, respectively. Weak global demand and trade war both depressed trade. CPI was 2.9% y/y in Q3, up 1.1 pps from Q1. Higher CPI incresed policymakers’ concern, which led to monetary policy tightening. At the end of September, M2 was up 8.4% y/y, the same as in June. M1 was up 3.4% y/y, down 1 pps from the end of June.
The U.S. Treasury Department on August 5th accused China of being a “currency manipulator.” The currency manipulator label seems baseless to us, according to the United States’ own unilateral standards. U.S. President Donald Trump is viewed through the prism of huge re-election pressure, and wants a deal before the November 2020 election. So the Chinese government is simply waiting. Yuan depreciation should be temporary, as it is driven by the negative sentiment of trade war.
China on September 10th removed the investment quota limitations on two inbound investment schemes: QFII, and the RMB QFII. Soon afterward, China A-Shares were added to the S&P Dow Jones Global Benchmark indices. More financial integration will improve China’s capital allocation and market efficiency. This also benefits Chinese firms, by lifting their competitiveness both directly and indirectly, and will increase their internationalization.
The State Council has announced 12 detailed measures to better facilitate cross-border trade and investment, including by improving foreign exchange management, and by further streamlining regulatory requirements. The plans, announced on October 23rd, are very detailed, and are expected to have an immediate positive impact on trade and foreign investment.
Now read on...
Register to sample a report