China’s economy saw a good start in the first quarter of 2019. GDP grew 6.4% in Q1, the same pace as in 2018 Q4 and reversing the growth deceleration since last year. Many economic indicators showed improvement and were ahead of market expectations.

Q1’s growth stabilization shows that stimulus measures adopted by the Government since the second half of last year are showing impact. However, we believe the recovery is still weak and at an early stage. The strong Q1 performance was boosted by several temporary factors, such as new IIT and VAT tax reforms, frontloading of infrastructure spending, and the temporary truce of US-China trade friction.

With slowing global economic growth and the re-escalation of US-China trade war, China’s economy is still facing significant challenges. We expect the government to adopt further supportive measures, including proactive fiscal policy and accommodative monetary policy, to counter economic slowdown. 

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