CHINA’S GDP SURPRISED ON THE UPSIDE BUT DEMAND STAYED RATHER WEAK

China’s GDP rose by 3.2% yoy in Q2, after a Covid-19 related drop by 6.8% in Q1, according to data published by China’s statistical office this morning.

Highlights:

  • China’s Q2 GDP growth surprised on the upside with 3.2% yoy.
  • However, a closer look reveals that the demand side is still the deterring factor in the economy. We expect these issues to ebb only slowly. Nevertheless, we revise our growth outlook up to 1.8% in 2020 from 1.3% before.
  • We expect further policy support to come mainly from the PBoC and expect another 50 bps RRR cut and a reduction Loan Prime Rate by 20 bps via MLF cuts.

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CHINA’S GDP SURPRISED ON THE UPSIDE BUT DEMAND STAYED RATHER WEAK.

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