Oct China & Asian Market Insight: “First in first out” - China’s economy continues to lead the global recovery

AXA IM’s Senior Emerging Asia Economist, Aidan Yao, shares his latest macro views on China and Asian Market every month.

In this month’s video he talks about the messages sent by China’s strong economic recovery and the outlook for the rest of the year.

Please find the full script below:

Hello, welcome to our monthly video series. My name is Aidan Yao. I’m the senior emerging Asian economist here at the AXA Investment Managers.

Q3 GDP data shows that Chinese economy has retained a decent amount of momentum from Q2’s  V-shaped rebound and entered the 2nd half of the year with a full head of steam. The economy expanded by 4.9% in the 3rd quarter, inching a step closer to its pre-COVID trend growth of 5.5-6%.

Apart from the solid headline growth print, the economic recovery has also become more broad-based.

Previous laggards of the recovery, such as services-sector activity and consumer spending, have caught up to the front-runners. While sectors that have done recently well over the last couple of months, such as industrial production, fixed asset investment and exports, have largely returned back to their pre-COVID level of growth.

The overall impression is that the economy has now fired on all cylinders, which will make the recovery more balanced and sustainable going forward.

We think the PBoC is likely to take cues from the strong data by further lifting its foot off the gas paddle. We have removed our calls for RRR or interest rate cuts for the rest of 2020, and really expect the monetary policy to stay in the neutral region.

We do, however, expect the fiscal policy easing to continue, in order to provide a safety net for the economy against elevated global uncertainties and lingering domestic headwinds.

We think year-on-year GDP growth is likely to further accelerate toward 6% by the final quarter of this year, with full-year growth ending at 2.3%.

However, we do think that financial market is likely to cast aside the real economic data flows, and instead, focus a lot more on the upcoming US election result, as well as any progress of vaccine developments.

Thank you very much and stay safe!