China: Regulatory storms, Delta variant flare-ups and growth deceleration

HONG KONG - July real economic indicators further confirmed a continuing moderated growth momentum amid the recent regulation storms as well as the Delta variant virus flare-ups in mainland China, according to a research report from BBVA.

Industrial production, retail sales and fixed asset iinvestment all registered decelerating year-on-year and month-on-month growth from the previous month's readings.

The moderate growth and financial market turmoil call for more easing measures in coming months, BBVA says, and it believes more targetted easing and liquidity management tools, such as RRR cuts, will be implemented.

"We maintain our 2021 GDP forecast at 8.2% y/y, which is way above the conservative official target of 6% announced in the "two sessions" this year, but lower than the market consensus of 8.5% and IMF's 8.4%," BBVA says.

The authorities were trying to take (advantage of) the time window of China's "first-in, first-out" of the pandemic to press ahead structural reforms and regulation tightening to pursue long-term equality and common prosperity, but the growth deceleration seems worse-than-expected," the bank adds.

"Is the current situation too much worrisome and is there any systematic risk on the way? Simply speaking, the answer is 'no' for both questions."

www.bbvaresearch.com (ATI).