Downside Pressure Persists

Economic Research	18 July 2016
China
Economic Highlights
Downside Pressure Persists China’s GDP remained unchanged at 6.7% YoY in 2Q16, but we see pressure coming from falling private investment and weakening industrial sectors. Only state-led investment and property-related sectors somehow provided supports to the economy in 1H16. Looking ahead, we expect a slower growth in the coming quarters, given pains from supply-side reform, challenges for private sector, moderating property investment, high funding cost and subdued global demand. Policymakers will use enlarged fiscal deficit and direct financial support by policy banks to ensure sufficient funds for its targeted fiscal stimulus packages; while the central bank will likely stick to “open market operations + SLF + MLF” mode to adjust liquidity levels, rather than a universal RRR cut in the near term. Economist:  Zhang Fan| +8621 6288 9611 ext 105
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