Interview
Takeaways from China’s Economic Data
- The official 6% growth target for 2020 is considered unlikely to be met, with authorities weighing options to lower or scrap the goal.
- Investors will focus on March data to assess the speed of economic normalization, noting meaningful month-on-month improvements consistent with recent daily and weekly trends.
- The industrial sector is normalizing more rapidly than the services sector due to quicker restarts, while services face gradual recovery over the coming months due to second-wave concerns and interaction risks.
- A sharp global economic slowdown in the second quarter presents demand challenges for China, though Western recovery may show a relatively rapid initial improvement as measures lift, despite taking considerable time to fully normalize.
- Government stimulus is expected to materialize, with a shift in rhetoric indicating significant easing, though policymakers remain cautious regarding rising leverage and property speculation.
- Monetary policy has already eased with rates below 2% and is expected to see further action, while the majority of fiscal heavy lifting is anticipated through infrastructure spending.
- Authorities are front-loading special bond quotas and considering a national special bond, a tool rarely used, to fund a large rise in infrastructure investment this year.
- The broader Asian region is entering its worst economic period in April, lagging China's timeline, with a strong correlation observed between lockdown intensity and services sector slowdowns.
- Very sharp economic slowing is projected for the second quarter across the region, with recovery expected to begin in the third quarter.
- Tourism-dependent economies in Southeast Asia face particular difficulties due to travel bans and lockdowns, necessitating a long-term balancing act between economic speed and virus containment.