China's Sectors: Still Resilient 2019 Outlook For Most, Despite Elevated Headwinds

摘要

1. In this article, we examine high frequency indicators to gauge how our 2019 outlooks for China's individual sectors are playing out amidst a negative backdrop of weakening macroeconomic indicators and still present trade tensions with the US. 2. The 2019 outlook for the consumer, infrastructure, metals and oil & gas sectors is generally positive, as despite growing headwinds increased government targeted stimulus measures aimed to boost income and construction spending are set to feed through to stronger demand for certain consumer goods, metals and oil products. 3. In contrast, China's agribusiness and autos sectors will face greater challenges. 4. Heightened uncertainties will serve to spur developments across the technology and medical devices sectors, as China seeks to reduce dependence on imported tech, including vital medical equipment, while boosting domestic capabilities in telecoms equipment. Government efforts in the pharmaceuticals sector will continue to focus on lowering costs for end-users. We expect China’s real GDP growth to continue slowing in H119, as a result of efforts undertaken in H118 to tighten both monetary and fiscal policy to limit debt growth, exacerbated by the ongoing US-China trade dispute. The external outlook continues to be clouded by trade tensions as a deal is still at least months away, with cascading effects on private consumption due to factory closures and reduced labour demand affecting employment and wage growth. That said, authorities have been expanding their support to the economy since July 2018 and announced another round of targeted stimulus policies in March to support the economy including CNY2trn in tax cuts for smaller businesses in 2019, which will likely begin to feed through in H219 and stabilize the economy (see ‘China's People's Congress Q&A: The Implications For Reforms, Growth And Trade’, March 17 & ‘Premier Li's NPC Speech Affirms Economic Growth As China's Top Priority’, March 6).