Chinese economic growth likely to have decelerated in Q3 2018

Chinese economic growth is likely to have slowed down in the third quarter of this year. According to an ANZ research report, China’s economy is expected to have grown 6.6 percent on a year-on-year basis. This is higher than the official target of 6.5 percent; however, this would be a deceleration from second quarter’s 6.7 percent.

China’s manufacturing sector has possibly underperformed in the midst of the escalating trade war. Nevertheless, if its services industry could maintain an annual growth of 7.6 percent year-on-year this year as in the first half of 2018, the economy could still attain full-year GDP growth of 6.5 percent in 2018 even if the secondary industry decelerates to 5.6 percent in the year compared with 6.1 percent in the first half of 2018, stated ANZ.

Some signs of recovery have been observed in property and infrastructure investment, which might assist in boosting the GDP growth in the fourth quarter. China’s credit impulse after three RRR cuts might stimulate property investment that in turn might raise the contribution of investment to GDP growth to 2.08 percentage points in 2018.

The risk of stagflation is a major concern. Given supply-side restraints, counter-cyclical measures might raise the output gap and engineer inflationary pressure.

“This will limit the central bank’s appetite to stimulate via monetary policy easing. Tax cuts should be the best option going forward”, added ANZ.

At 14:00 GMT the FxWirePro's Hourly Strength Index of Chinese Yuan was slightly bullish at 61.6842, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -48.2135. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex