China: Pro-growth policies signal headwinds remain – ING

Iris Pang, economist at ING, notes that China set its GDP growth target for this year at 6.0% to 6.5%, thereby disappointing the investors and below the ING’s forecast of 6.3%.

Key Quotes

“The fiscal deficit target for this year is 2.8%, higher than 2.6% a year ago. And it is well known that the actual fiscal deficit is around 0.5 percentage points higher than the planned target.

China is again relying on infrastructure investments and construction activities to help its manufacturing sectors. We believe that with so many pro-growth measures, the economy can grow within the target range of 6.0% to 6.5%.”

“The fact that China needs such sizeable fiscal stimulus to support economic growth suggests that the headwinds are significant and will not go away easily. The Chinese government is presumably cautious about the development of the trade war. And businesses are also likely to be careful about making big investment decisions until it is very clear that business risks from the trade war have ended.”