Chinese exports gained ground in Q3, but economy slowed

HONG KONG - In a new research note, French banking group Natixis says China's economic slowdown is more likely to be a result of domestic issues (such as lower returns on capital) than on external shocks. It says that while the market tends to attribute slower growth to the US-China trade war, the ironic reality is that, in the third quarter,  China's exports continued to gain ground, even into the U.S. market.

Nataxis believes the Chinese economy will continue to be on a decelerating trajectory over the balance of 2018, pointing out that, in Q3, investment remained stagnant and final consumption growth dropped, and business confidence in both manufacturing and theservice sector fell.

"To improve negative sentiment, Chinese authorities escalated their fiscal and monetary expansion schemes in the latest high-profile Politburo meeting," Natixis says.

"However, monetary transmission has not been effective in lowering funding costs in the real economy.

"Clearly, the Chinese Government has realised the domestic difficulties, and is trying very hard to deter from the pessimistic scenario, but it needs more efforts to reach targets.

"Due to the negative sentiments in the economy, we expect  growth to further slow down in Q4 2018.  www.natixis.com (ATI).