Contrary to views that China’s economic slowdown has further to go, both credit data and our proprietary industrial activity indicator, the R-CAT, suggest stabilization of cyclical momentum is actually closer at hand than expected. However, the recovery early in 2019 will be shallow, as trade tensions and the property sector remain key headwinds this year. The PBOC cut banks’ reserve requirements once again today, consistent with an easing bias in monetary policy throughout this year, and cuts to key interest rates are expected as well.
