A slow landing for China

Also Interesting

• What alikely NXP-QCOM deal break means for merger arbitrage
• Firmer China offsets weaker India
• Intech Equity Market Stress Monitor®

• The Chinese consumer is at the heart of public support measures but rebuilding confidence will take time. More support measures are likely by year-end to stimulate employment (e.g. corporate rate cuts, notably for SMEs). Cash handouts or VAT rate cuts are not yet the preferred option but they remain likely.
• The housing market should stabilize at low levels. Further regulatory easing measures are expected to allow second-home buyers to become first-home buyers in more Tier-1 cities. Together with further rate cuts and the reduction in minimum down payment ratios for first- and second-home buyers, this should help reduce the housing glut and improve confidence. On the infrastructure side, annual quotas are expected to be fully utilized by end-September and additional spending should be announced to avoid a fiscal cliff in Q4 (0.5% of GDP from 2022 unused quotas).
• China will continue to export deflation as overcapacities in the manufacturing sector remain. This has pushed Chinese companies into an export-price deflationary cycle and cut -1pp on average from y/y inflation in the US and Eurozone since June.