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Published on Wednesday, April 22, 2020 | Updated on Wednesday, April 22, 2020

China Economic Outlook. Second quarter 2020

China's GDP growth dipped to historical low in Q1 amid COVID-19. The sliding growth calls for more policy stimulus. We believe pro-growth measures will help put China’s growth engine back to the right track. The GDP growth rate will steadily climb up to 7% y/y in Q4, concluding 2020 with a full-year growth outturn of 2.2%.

Key points

  • Key points:
  • China’s government announced that its growth rate dipped to -6.8% y/y ( versus market consensus of 6% y/y) in the first quarter of 2020, which is the historical low.
  • The quick recovery in industrial production shows that the supply shock caused by the COVID-19 outbreak tends to be short-lived. In contrast, the demand shock caused by the pandemic needs more time to dissipate.
  • The overwhelming growth concern will prompt China’s authorities to deploy more loosening policy initiatives to rev up the economy, in particular on the front of domestic demand.
  • Fiscal policy tools unquestionably exceeds in terms of being more targeted. Market observers anticipate the central government to substantially expand the size of 2020 fiscal deficit to above 4% of GDP compared to 2.8% last year.
  • The GDP growth rate will steadily climb up to 7% y/y in Q4, concluding 2020 with a full-year growth outturn of 2.2%.

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