China’s growth steady as she goes, Goldman Sachs says
Broad support, targeted tightening and effective capital controls will help manage trade headwinds
Goldman Sachs Asia-Pacific economist Andrew Tilton sees only a modest decline in China’s economic growth during the next year.
“Chinese policy combines broad support and targeted tightening to address [the] highest-profile risks,” Tilton wrote in a recent client presentation. Monetary policy is “continuing to shift towards growth support (lower rates/reserve requirements, flexibility on shadow banking regulation, administrative efforts to boost spending), reflecting concerns over tighter domestic credit and the trade outlook.”
Tilton adds that the yuan has “re-stabilized at a weaker level with minimal outflows,” although he cautions that the “outcome on US-China trade and the extent of bond-market related inflows will be important drivers going forward.” He believes that China’s GDP growth will hold around 6%, adding, “Policymakers have shaved growth targets only slightly, despite signs of slowing potential.”
Capital outflows are not a concern, Tilton believes, because Chinese capital controls remain effective.