China: Economic confidence to improve - AmpGFX

According to Greg Gibbs, analyst at Amplifying Global FX Capital, the multi-pronged stimulus policy announcement by senior Chinese government officials on Tuesday should bolster confidence in the Chinese economy. 

Key Quotes

“The market has probably braced for more evidence of a significant slowing in the Chinese activity data due next week.  And it should at least start to see a case for growth stabilising and possibly improving over the coming year in response to these stimulus measures.”

“There were a number of stimulus measures announced including tax cuts, rebates, and investment incentives for small private companies. They also announced plans to cut income tax but were less specific.”

“The stimulus measures appear significant in scale, are broad-based, and also more highly targeted on the smaller private companies that appear to have been a major drag on the economy in the last year.  As such, we expect them to help stabilise economic and investor confidence in China.”

“Chinese stimulus measures should tend to support global investor confidence; this includes for more export-driven economies that rely on global, and in particular Chinese, demand. The EUR appears to have suffered recently from a stalling in Eurozone export growth and the recent decline in industrial production.  The prospect of stronger demand from China should help support the EUR.”