China 2019 Economic Report

1 Economic Overview

1.1 Macroeconomic situation: decent start in Q1, gloomy ahead – but no stimulus

China reported 6.4% growth in the first quarter, up from 6.3% growth in the October-December period. However, exports fell 2.7% y/y in April and the growth rate of industrial production came in at 5.4% (down 1.6 percentage points y/y. Key indicators as retail sales and investment plummeted, while the 7.2% consumption growth rate marked the lowest point since 2003. In May, Fix Asset Investment (FAI) came in around 4% y/y, down from 5.7% in April and manufacturing investment was also declining, with PMI came in as 49.4, signaling contraction.  

China’s economy is facing significant downward pressure and the weak data indicates that growth will decelerate in Q2. The Chinese economic slowdown may be attributed to at least three developments. First, a slower global growth due to a weaker global demand. Second, both consumers and companies may reduce their spending due to rising uncertainties. Third, some low added value companies, incentivized by the ongoing trade tensions and rising productions costs in China have started relocating their productions or rerouting their products to other countries.  

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