China’s economy expands by +7.5% YoY and +2.0% QoQ (seasonally
adjusted) in 2Q 2014, up from +7.4% YoY and +1.5% QoQ in 1Q 2014.
Nonetheless, amid slowing investment and property downturn, annual growth is expected to soften from +7.7% in 2013 (1H 2014: +7.4%).
Maintain our full-year forecasts of +7.3% in 2014 and +7.0% in 2015.
Growth stabilized after earlier slowdown. China’s economy grew by +7.5% YoY in 2Q 2014, up from +7.4% YoY in 1Q 2014, giving 1H 2014 GDP growth of +7.4%. On seasonally adjusted QoQ basis, growth improved to +2.0% from +1.5%.
Suggesting some effect from mini fiscal stimulus. Back in April 2014, the Chinese authorities announced a mini fiscal stimulus package that consisted among others CNY350b-CNY450b railway spending (mainly in the less-developed central and western regions); speeding up the implementation of approved investments and projects (e.g. 80 projects in railways, telcos, clean energy & pipelines open for private sector investment or JVs with SOEs, with similar plans for oil exploration, utilities, airports); housing projects for the low-income groups; and improve the preferential tax treatment to the small and micro businesses by removing the annual taxable income threshold of below-CNY60,000 to qualify for a 50% tax cut, and extend the tax incentive until end-2016 from end-2015.
Complemented by targeted monetary stimulus. Since June 2014, the People’s Bank of China (PBoC) has initiated measures to counter illiquidity/insolvency risk, as well as reduce the cost of financing after the scares earlier this year following news of defaults or debt repayment problems at several companies in industries like solar panel manufacturing, coal mining and real estates. Besides the weaker Yuan, other measures taken by the central bank include lower reserve requirement ratios for banks and providing special credit facilities for institutions that lend to specific sectors (e.g. rural, agriculture, SMEs, low-cost housing); net injection of liquidity via its open market operations in recent weeks as opposed to net withdrawal previously to lower market short-term and long-term interest rates; and increasing banks’ capacity to lend by changing the composition of the loan-deposit ratio to address the 75% cap.
Source: Maybank Research - 17 Jul 2014
Nonetheless, amid slowing investment and property downturn, annual growth is expected to soften from +7.7% in 2013 (1H 2014: +7.4%).
Maintain our full-year forecasts of +7.3% in 2014 and +7.0% in 2015.
Growth stabilized after earlier slowdown. China’s economy grew by +7.5% YoY in 2Q 2014, up from +7.4% YoY in 1Q 2014, giving 1H 2014 GDP growth of +7.4%. On seasonally adjusted QoQ basis, growth improved to +2.0% from +1.5%.
Suggesting some effect from mini fiscal stimulus. Back in April 2014, the Chinese authorities announced a mini fiscal stimulus package that consisted among others CNY350b-CNY450b railway spending (mainly in the less-developed central and western regions); speeding up the implementation of approved investments and projects (e.g. 80 projects in railways, telcos, clean energy & pipelines open for private sector investment or JVs with SOEs, with similar plans for oil exploration, utilities, airports); housing projects for the low-income groups; and improve the preferential tax treatment to the small and micro businesses by removing the annual taxable income threshold of below-CNY60,000 to qualify for a 50% tax cut, and extend the tax incentive until end-2016 from end-2015.
Complemented by targeted monetary stimulus. Since June 2014, the People’s Bank of China (PBoC) has initiated measures to counter illiquidity/insolvency risk, as well as reduce the cost of financing after the scares earlier this year following news of defaults or debt repayment problems at several companies in industries like solar panel manufacturing, coal mining and real estates. Besides the weaker Yuan, other measures taken by the central bank include lower reserve requirement ratios for banks and providing special credit facilities for institutions that lend to specific sectors (e.g. rural, agriculture, SMEs, low-cost housing); net injection of liquidity via its open market operations in recent weeks as opposed to net withdrawal previously to lower market short-term and long-term interest rates; and increasing banks’ capacity to lend by changing the composition of the loan-deposit ratio to address the 75% cap.
Source: Maybank Research - 17 Jul 2014
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