China: Economy remains challenging despite signs of recovery – HSBC

Against the backdrop of a sharp near-term slowdown in economic activity in January-February, investor focus is now on the pace at which China’s economy can return to normal, economists at HSBC brief.

Key quotes

“Chinese policymakers have responded to the COVID-19 through mostly short-term, emergency and targeted fiscal and credit (relief) policies, as well as monetary easing. More policy support is expected to boost demand as supply-side disruptions may gradually ease.” 

“Faster work resumption coupled with relaxation in containment measures and intensified macro policy support should allow for a sequential activity recovery in March vs. February, though the overall growth likely remains subdued in March and Q1 is on track to show contraction.”

“Even after assuming growth normalisation in April/Q2 and a further  rebound in the second half of the year, the recovery is likely to be insufficient to fully offset the large negative shock in Q1. This coupled with increased risk of a global recession could result in significantly lower annual growth than 2019’s 6.2%.”