China | Growth slowdown in Q3 calls for more easing measures

Summary

The Q3 GDP outturn together with September real economic indicators further confirmed a continuing moderated year on year growth momentum. The authorities are aware of the growth deceleration and will strike a balance between stimulating growth and pressing ahead structural reforms going forward.

Key points

• Key points:
• The Q3 GDP decelerated remarkedly to 4.9% y/y from 7.9% in Q2 while its quarter on quarter growth also moderated to 0.2% q/q from 1.2% q/q previously.
• Quite a number of headwinds weigh on growth, including the recent power crunch, the contagion effect of Evergrande default risk and regulation storms targeted on “common prosperity” and social equality that cracked down a number of sectors.
• The weaker-than-expected Q3 GDP reflects the authorities’ intention to concern more about the long-term structural issues instead of the short-term growth figures.
• The slowdown of China’s economic growth will certainly prompt the authorities to deploy more pro-growth fiscal and monetary policy initiatives in the rest of the year to stimulate growth.
• To reflect growth slowdown and the headwinds stated above, we lowered our 2021 GDP forecast to 8.0% from 8.2% (Market consensus: 8.2%; IMF: 8%).

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