East Capital macro economist Asia Kristina Sandklef sees proactive policies in China

The pending change of leadership in China could lead to more proactive policy to stimulate the country’s economy, says East Capital’s economist for Asia Kristina Sandklef.

East Capital believes China’s GDP growth will continue to benefit from major infrastructure investments and that new leadership in November looks set to usher in a period of more proactive policy:

• Whilst a number of the newly approved infrastructure projects listed by the National Development and Reform Commission (NDRC) were approved as far back as April, their approval will stimulate the economy while providing much needed updates to infrastructure;

• The projects will be funded with local government equity and bank loans and the central government in Beijing has offered additional funds of around RMB 900 billion which can be used if the economy slows even more;

• Positive Q3 estimates will result in continually high investment in fixed asset investments and infrastructure;

• Chinese economic slowdown has been induced by the Chinese government to cool  sectors which started to show signs of overheating but also to avoid unnecessary infrastructure investments;

• With the upcoming leadership transition, although the exact names of the new leaders are yet to be revealed, rumoured candidates seem to be oriented towards economic reforms which will improve China’s prospects of continuing its economic development.

 

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