Green Shoots in China

Global Perspectives by Nick Niziolek, CFA and Todd Speed, CFA

Heading into 2019, our view was that global growth would likely “re-synchronize” this year, following 2018 when fiscally induced economic strength in the U.S. offset weaker economic conditions in China as Beijing tightened liquidity conditions and implemented reforms.

Although data is mixed, key indicators have affirmed our positive bias toward China. In our most likely scenario, the U.S. and Chinese economies stabilize in coming quarters, with good potential for moderate re-acceleration during 2H19. Recent economic data out of China points to stabilization as looser liquidity conditions and increased fiscal stimulus work through the system.

On the whole, March figures point to broad based strength across both consumer and industrial activity, as well as in key credit data.

• Industrial production surprised on the upside, with better-than-expected export levels.
• Retail sales were also stronger than expected, with March data rising 8.7% versus the prior year, as auto sales picked up in the wake of targeted programs for new vehicle purchases.
• Investments in infrastructure and real estate also notched higher in March, benefiting from growth on the heels of policy support.

Even when weighed against the more tempered comments from the Chinese government, these green shoots are encouraging. The resumption of trade negotiations with the U.S. in the coming days will provide another key signpost as the two sides make progress toward what we hope is a durable agreement.

China: Signs of Stabilization and Positive Inflection Points 
Year-over-year change (%)