China’s second-quarter economic data was released earlier
Credit Suisse’s chief Chinese economist Wang Yi said in an exclusive interview with the newspaper that the second quarter’s manufacturing investment growth slowed further to 2.2%, reflecting the uncertainties in the Sino-US trade war. There is pressure on manufacturing investment and employment. It is expected that China’s economy will show a “soft landing” in the second half of the year. It is expected that China’s GDP growth will reach 6.1% in the second half of the year. He pointed out that ordinary households have accumulated debts in recent years. It is expected that household consumption will slow down in the next three to five years, and there is limited room for economic growth by domestic demand.
China’s second-quarter GDP growth reached 6.2%, in line with market expectations. Wang Yi believes that the economy in the second quarter is mainly driven by real estate and infrastructure investment, but it is worth noting that manufacturing investment fell from 5% in the first quarter to 2.2%, indicating that the industry is watching the trade war situation and suspending large investment or equipment. upgrade. He believes that the biggest challenge of the Chinese economy now comes from the uncertainty of the trade war, and the tariff measures imposed by the United States are not the biggest downward pressure.
Renminbi “guarantee 7” negotiations have hope
Wang Yi mentioned that whether the renminbi can “guarantee 7” is an important signal for the progress of Sino-US trade negotiations. Once it breaks 7 or reflects that the US tariff measures will be upgraded, trade agreements cannot be reached, and China needs to be devalued. The impact of tariffs, “When the renminbi remains below 7 against the US dollar, it is clear that there is still hope for Sino-US trade talks.”
Faced with weak manufacturing investment, he expects the mainland to continue to rely on real estate and infrastructure investment growth to cushion the impact of trade, but is cautious about consumption growth. In June, the total retail sales of consumer goods rose by 9.8%, exceeding market expectations. However, the consumption data for the month was driven by the price reduction promotion of auto dealers, and the family also bought in advance. It is expected that Chinese consumption will not continue to rebound in the future.
Tax reduction and fee reduction results reflected in the quarter
Regarding whether domestic demand growth can offset the impact of weakening foreign trade, Wang Yi said that as China’s ordinary household debt has accumulated in recent years, and the economic prospects are unclear, personal purchasing power is declining, whether it has a negative impact on the demand for cars or housing. Therefore, although the mainland is expected to support the economy, it may relax the property market regulation measures such as purchase restrictions. However, it is believed that the final demand for housing may not be supported, and the new construction growth rate of housing enterprises will also slow down.
In addition to the trade war, Wang Yi believes that another challenge for China is the issue of credit allocation. The problem of financing difficulties for SMEs has not improved significantly. From the beginning of the year to the present, the speed of money circulation has not increased significantly, reflecting that loan allocation has not been effective; the problem is not that the current liquidity is insufficient.