Investment outlook 2019: Mid-year update – China - J.P. Morgan Asset Management

Investment outlook 2019: Mid-year update – China

Contributor Karen Ward
Beijing will do whatever it takes to ‘win’ US China trade war


While there are questions over exactly how aggressively the Federal Reserve (Fed) will act to support the US economy, Beijing’s commitment to keep the show on the road is in no doubt. If China cannot “win” the trade war, it will ensure its economic ambitions remain on track. Early reticence to open the monetary and fiscal spigots is fading. Local government bonds are being issued to fund infrastructure projects, and taxes are being cut to boost consumer spending (see below). We do not doubt the intention of policymakers to keep growth in the region of 6%. The only question is how quickly and powerfully the authorities’ efforts bear fruit, and whether that stimulus eventually serves to support growth in China-dependent countries.

China stimulus

% of GDP

Source: Ministry of Finance of China, J.P. Morgan Securities Research, J.P. Morgan Asset Management. Central government spending is the incremental expenditure by the central government on infrastructure construction and subsidies to certain economic sectors. The spending is financed by tax revenue and issuance of treasury bonds. Local government spending is mostly composed of infrastructure investment conducted by local governments and their financing vehicles. These investments are mainly financed by bank loans, issuance of special local government bonds, policy bank loans and Private Public Partnership (PPP) projects. Tax cuts include cuts to VAT, personal income tax, corporate taxes and tariffs. Data as of 13 June 2019.


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Key themes for 2019

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