China’s Q3 slowdown calls for more easing: BBVA

October 18, 2021

HONG KONG - China's Q3 GDP figures together with September real economic indicators have further confirmed a continuing moderation of year-on-year growth momentum, and Chinese authorities will need to strike a balance between stimulating growth and pressing ahead with structural reforms, says BBVA Bank. 

Q3 GDP has decelerated markedly to 4.9% y/y from 7.9% in Q2, while quarter-on-quarter growth also moderated to 0.2% q/q from 1.2% q/q previously. The weaker-than-expected Q3 GDP reflects the authorities' intention to address the long-term structural issues ahead of short-term growth figures, BBVA says.

"To reflect the growth slowdown and the headwinds stated above, we have  lowered our 2021 GDP forecast to 8.0% from 8.2% (market consensus: 8.2%; IMF: 8%)," it adds.

"Quite a number of headwinds weigh on growth, including the recent power crunch, the contagion effect of the  Evergrande default risk and regulation storms, targetted on "common prosperity" and social equality, that saw a crackdown in a number of sectors.

"The slowdown of China's economic growth will certainly prompt the authorities to deploy more pro-growth fiscal and monetary policy initiatives in the rest of the year to stimulate growth."

www,bbvaaresearcg,com  (ATI).