From the Paulson Institute's MacroPolo, November 4:
Macro Polo Analysis Q4
Macro Outlook: Growth To Stabilize as Beijing Prepares for a Rockier 2020
Key Takeaways for 4Q2019
With China’s third-quarter growth coming in at 6%, the lowest since 1990, it has reignited market anticipation for stronger stimulus. However, the weak headline figure belies an economy that had found its footing by September and will likely soon stabilize.
- China’s growth will likely remain stable through 4Q2019, with minimal risk of the growth rate dipping below 6%.
- Looking beyond 4Q2019, however, the growth picture becomes muddier because of a series of headwinds, ranging from property sector slowdown to softness in the global economy.
- As such, Beijing will likely again refrain from major stimulus for the rest of the year, while at the same time prepare for the anticipated growth slowdown. If there is the possibility of any major stimulus, it will likely only come at the very end of the year to pave the way for 2020.
This means there is less urgency to ramp up stimulus. Instead, current policy support will be ratcheted up for the remainder of the year. As the economy stabilizes, Beijing will use the rest of the year preparing and refining its stimulus tools in anticipation of a global economic contraction in 2020.
The rest of this outlook will focus on near- and medium-term growth prospects, examine why the economy will stabilize, even if short-lived. Finally, I will forecast policy actions that Beijing will likely take in the fourth quarter to close out the year.....MUCH MORE
Resilient Property Sector and Fiscal Spending Will Support Growth
During July and August, the Chinese economy seemed on the verge of collapse. For example, monthly growth of industrial value-added and energy consumption both fell to nearly zero. Yet by September, most economic indicators had rebounded from their summer lull. Barring any further escalation of the trade war, I believe there is minimal risk of growth falling below 6% in 4Q2019.[1]....
