3Q2019 GDP grew at the slowest pace since records began in March 1992. While pointing at a continuation in a long-running slump compounded by the US-China trade war, which has hit manufacturing and exports, we also believe it is due to domestic challenges. The clamping down on lending on risky assets have hurt small businesses while consumers are hurt with the difficulties of getting credit to purchase big-ticket items.

The government has set a target range of 6.0% to 6.5% for the overall growth rate in 2019. We continue to maintain our 6.2% growth for 2019 with the downside at 6.0% while for 2020, it is at 5.8% with the downside at 5.5%. Meanwhile, the IMF has revised downwards China’s growth to 6.1% and 5.8% respectively for 2019 and 2020.

• 3Q2019 GDP grew at the slowest pace since records began in March 1992. The economy grew 6.0% y/y from 6.2% y/y in 2Q2019 which was itself the lowest. (+6.4% in 1Q2019). The government has set a target range of 6.0% to 6.5% for the overall growth rate in 2019.

• The new low marks a continuation in a long-running slump that has been compounded by the US-China trade war, which has hit manufacturing and exports.

• Also, domestic issues are to be blamed. Chins clamped down on risky lending and tightened up shadow banking channels to remove some debt from the highly-leveraged economy. It has hurt the real economy, with small businesses struggling to gain the access to credit needed to invest and expand. As for consumers, they do not have the ready access to capital and this has reduced their ability to purchase big-ticket items.

• A batch of data released like September industrial output of 5.8%y/y was better than August’s figure of 4.4% , which was a 17-year low. Retail sales, a key metric of consumption, grew by 7.8% y/y in September from 7.5% in August while imports fell 8.5% y/y, implying that not all is well in the manufacturing market and consumers. Fixed investment assets grew 5.4% y/y till September from 5.6% y/y till August.

• With such numbers, it somewhat raises the question on the impact of stimulus measures . We continue to maintain our 6.2% growth for 2019 with the downside at 6.0% while for 2020, it is at 5.8% with the downside at 5.5%. Meanwhile, the IMF has revised downwards China’s growth to 6.1% and 5.8% respectively for 2019 and 2020.

Source: AmInvest Research - 21 Oct 2019