Head of China Research - Forsyth Barr Asia, Forsyth Barr Asia

David Millhouse

Head of China Research - Forsyth Barr Asia

Forsyth Barr Asia

Macroeconomics

<p>The latest round of economic data, and the cyclical indicators we monitor have confirmed to us our view that downside risks to growth are still prevalent (please see our note from earlier this week on growth risks). I believe are about to see another round of monetary easing near term.&nbsp; We are looking for&nbsp;in the coming month;</p><div>a) A 100 bps RRR cut</div><div>&nbsp;</div><div>b) Another 25bps symmetric rate cut<br/><div>&nbsp;</div><div>c) More direct property easing (more cities lowering downpayment ratio's, and government enforced mortgage easing).&nbsp;</div><div>&nbsp;</div><div>In addition to monetary easing, we believe the government will also continue accelerating fiscal spending.&nbsp;China has accelerated the approvals of infrastructure projects in recent months as economic growth slows. In May alone, it approved over 467 billion yuan of investments in transportation projects.</div></div>

The latest round of economic data, and the cyclical indicators we monitor have confirmed to us our view that downside risks to growth are still prevalent (please see our note from earlier this week on growth risks). I believe are about to see another round of monetary easing near term.&nbsp; We are looking for&nbsp;in the coming month;a) A 100 bps RRR cut&nbsp;b) Another 25bps symmetric rate cut &nbsp;c) More direct property easing (more cities lowering downpayment ratio's, and government enforced mortgage easing).&nbsp;&nbsp;In addition to monetary easing, we believe the government will also continue accelerating fiscal spending.&nbsp;China has accelerated the approvals of infrastructure projects in recent months as economic growth slows. In May alone, it approved over 467 billion yuan of investments in transportation projects.

CHINA MACRO:  Growth downside risks growing - More aggressive easing needed