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China May Use Economic Tools to Battle First-Quarter Economy Shrink, Chief Economists Say
He Xiao
DATE:  Apr 13 2020
/ SOURCE:  Yicai
China May Use Economic Tools to Battle First-Quarter Economy Shrink, Chief Economists Say China May Use Economic Tools to Battle First-Quarter Economy Shrink, Chief Economists Say

(Yicai Global) April 13 -- China may trim the reserve requirement ratio and interest rates in future after the economy likely shrunk in the first quarter, according to respondents to the latest Yicai Chief Economist Survey.

The Yicai Chief Economist Confidence Index 47.81 for April, higher than in March but still below the halfway mark as respondents predicted that Covid-19 will continue to weigh on the economy this month.

Twenty of the chief economists projected China’s gross domestic product growth for this year, pegging the average at 2.87 percent, down from 5.96 percent at the end of last year with all respondents expecting expansion to slow. The short-term impact of Covid-19 will be significant and the GDP likely contracted in the first quarter, the economists believe, predicting it may have shrunk as much as 6.48 percent.

Seventeen of the respondents believe the People’s Bank of China will lower the one-year loan prime rate this month, four think it will lower benchmark deposit rates and two expect it will lower the deposit reserve ratio. Overall, they expect China to remain proactive and forecast significant annual growth in new loans, social financing aggregate and M2 broad money supply for last month.

Other key predictions, based on the mean of responses, from the survey are below:

- The yuan will hit 7 a dollar, compared with a 6.98 prediction from the end of last month.
- Retail sales slid 9.39 percent last month, compared with a 20.5 percent decline over January and February.
- The industrial value-added contraction rate last month was 6.76 percent, some 6.74 points higher than the January-February figure published by the National Bureau of Statistics.
- Fixed asset investment shrunk 15.2 percent in March, compared with a 24.5 percent decline in the first two months published by the NBS.
- Real estate investment slid 9.94 percent, 6.36 points higher than the official decline over January and February.
- Foreign trade will hit a USD14.6 billion surplus in March after a USD7.1 billion deficit in February. Exports will slide 16.6 percent, slightly less than in the two months prior, and imports will slide 11.3 percent compared with 4 percent in January and February.

The mean over January and February is used as a reference as the Chinese New Year falls in either of these months each year and this can largely skew data.

Editor: James Boynton
 

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Keywords: Survey,GDP,CPI,RMB