While the death rate of the N-coronavirus is less than 3%, well below that of SARS in 2003 (10%) and Beijing’s response is considerably quicker than 17 years ago, the fact that the crisis is taking place during Spring Festival, China’s peak travel season means that the economy will likely take a bigger hit compared to 2003.
Xi has achieved a more effective central leadership and a clear-cut decision-making process. Ambitious policy initiatives such as financial de-risking and cutting industrial capacities were carried out forcefully and rapidly. But at the same time, as local officials become wary of potential wrongdoings, the centralization process has also caused inertia across local governments, resulting in potential risks in policy implementation.
China’s economy looks fine from a cyclical perspective, as data released last Friday suggest. Real GDP growth stabilized at 6% in Q4 2019, ending five consecutive quarters of deceleration, and most monthly indicators beat expectations in December. The continued recovery of automobile, electronic equipment and external demand will offer the tailwind through the next couple of quarters.
For the United States, the major gain is China’s commitment to purchase more American goods. Based on the agreement, the annual export of goods and services from the US to China should increase to $263bn in 2020 and $310bn in 2021, and 80% of the increase would come from goods.
For the United States, the major gain is China’s commitment to purchase more American goods. Based on the agreement, the annual export of goods and services from the US to China should increase to $263bn in 2020 and $310bn in 2021, and 80% of the increase would come from goods.
China’s financial regulators keep reiterating that raising capital is a top task for banks, especially the medium and small ones. This is necessary partly because Chinese banks need more capital to support its 12-13% loan growth, and partly because the People’s Bank of China (PBOC) wants to avoid more bank failures after bailing out three medium banks in 2019. The large scale of capital raising is positive from a cyclical perspective as it removes a key constraint for banks to lend more, but the downside is that some capital instruments are cross held.
