China: GDP grew 6.4%YoY in 4Q18 – ING

Iris Pang, economist at ING, notes that China’s 4Q18 GDP report shows stable 6.4%YoY growth and 6.6% for full-year 2018, but the details point towards weakness underneath.

Key Quotes

“Fixed asset investment grew 8.7%YoY in December. But this was thanks to infrastructure investments which themselves rose 3.8%YoY (from 3.7%YoY), and brought growth in metal products of 15.4%YoY (used in the production of metro lines, projects being led by local governments).” 

“Industrial production grew faster at 5.7%YoY in December from 5.4%YoY. However, again, when we look at the details, we find that CAPEX related items are shrinking, not growing.”

“Retail sales tell a story of a cautious consumer, one that is not keen to spend on luxury items. For example, automobile sales fell 8.5%YoY in December.” 

“Our baseline forecast assumes that the trade war will continue in 2019. GDP will be 6.3% as fiscal stimulus of CNY 4 trillion and 3 more RRR (required reserve ratio) cuts will support the economy in terms of funding and liquidity. We expect USD/CNY reaching 7.30 by end of 2019.”