China: Economic Growth to prove resilient

5 min
Mahamoud Islam
Mahamoud Islam Senior Economist for Asia

China’s currency and stock markets have been under significant pressure over the past few days as new U.S. tariffs are expected to take effect on 6 July. This led the Chinese Central Bank to adopt a more defensive strategy as it cut the reserve requirement ratio by -50bp to provide liquidity to the banking system. Meanwhile, latest economic indicators suggest that there is still room to grow in the short run. Corporates’ financial health remains solid as reflected in the continued rise in profits (industrial profits up +16.5% y/y in January-May). And confidence remains resilient despite rising trade tensions. The official Manufacturing PMI decreased to 51.5 points in June (from 51.9 in May) but still suggests expansion. The Non-manufacturing PMI edged up to 55.0 (from 54.9 in May). Against that background, we expect economic growth to rise by +6.6% in 2018 (after +6.9% in 2017).