China: Stimulus measures start to have tangible impacts

3 min
Mahamoud Islam
Mahamoud Islam Senior Economist for Asia

Real economic growth edged down to +6.4% y/y in Q4 2018 (from +6.5% in Q3) as expected. The services sector slowed to +7.4% y/y (from +7.9% in Q3) while the industrial sector picked up speed to +5.8% y/y (after +5.4% in Q3) driven by stronger construction output. In nominal terms, GDP growth slowed to +9.1% y/y in Q4 (from +9.4% in Q3). Monthly data show signs of stabilization in domestic demand while trade fears persist. Nominal retail sales edged up to +8.2% y/y in December (from +8.1% in Novem­ber). Nominal urban investment stabilized at +5.9% y/y in January-December (up from +5.4% in January-September). Industrial production rose by +5.7% y/y in December (after +5.4% in November). Looking ahead, the authorities’ supportive policy measures are starting to have a tangible impact on the economy. Public and infrastructure spending are edging up gradually. On the financing side, easing measures focus rather on quality than quantity. Formal and strongly regulated lending is improving while shadow banking decreases. Against that background, Euler Hermes expects real GDP growth of +6.3% in 2019 (after +6.6% in 2018).