Ho Woei Chen, Economist at UOB Group, assessed the recent trade data from the Chinese economy and prospects for economic growth.

“China’s exports (in USD terms) remained in contraction at -3.2% y/y in Sep (exp: -2.8%, Aug: - 1.0%) and imports at -8.5% in Sep (exp: -6.0%, Aug: -5.6%), coming in below consensus expectation. Trade surplus widened to US$39.65 bn in Sep from US$34.83 bn in Aug. Although US and China reached a Phase 1 trade deal, there was no major breakthroughs and the bulk of the focus was on the US$40-50 bn in annual agricultural goods purchases by China while the the 15 Oct tariff was delayed not cancelled and 15 Dec US additional tariffs of 15% on approximately US$160 of Chinese goods remains in place. Between now and APEC summit on 16-17 Nov where US and China leaders will sign the Phase 1 agreement, there remains significant risk of breakdown in talks. We assessed the probability to be around 35%. With existing tariffs remaining in place, we keep our full-year growth forecast for China at 6.1% in 2019 and 5.9% in 2020. We expect to see continued weakness in China’s economic data in the near-term. This includes the upcoming release of the 3Q19 GDP (18 Oct), which we forecast at 6.0% y/y vs. 6.2% in 2Q19. This should see Chinese policymakers maintaining a measured pace of proactive fiscal and monetary easing”.