China economic activity remains sluggish and is undershooting this year's 5% growth target. The economy grew less than expected in Q3 (actual: 0.9% q/q, consensus: 1.1% q/q) and the previous quarter rise was revised down 0.2pts to 0.5% q/q. Year-to-date, real GDP growth slowed at an annual pace of 4.8% (consensus: 4.9%) from 5.0% in Q2, BBH FX analysts note.
“The increase in China’s September prints for industrial production, fixed asset investment, and retail sales growth largely matched consensus. However, the property slump worsened and is an ongoing drag on consumer spending. New home prices are down -6.1% y/y vs. -5.7% y/y in August, the biggest decline since May 2015, and used home prices dropped a record -9% y/y vs. -8.6% y/y in August.”
“China’s benchmark CSI 300 Index rose 3.6%. The People’s Bank of China (PBOC) launched its share buyback support program, first announced on September 24. The PBOC governor also said he expects another 25 to 50 bp cuts to banks’ reserve requirement ratio (RRR) before the end of the year.”
“Nevertheless, Chinese policymakers need to deliver a meaningful fiscal stimulus program aimed at boosting consumer spending to sustain the rally in Chinese stocks. Details of China’s recent fiscal stimulus pledge are anticipated to be unveiled later this month. In the meantime, Caixin reported that China may raise 6 trillion yuan (5% of GDP) from ultra-long special government bonds over three years to support economic activity.”
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