BNP Paribas believe that evidence has.........>

CHINA: BNP Paribas believe that evidence has mounted that China's "tighter

policy mix is weighing on growth while trade tensions raise the levels of

uncertainty. As a result, comments from the State Council & Central Politburo

have marked a significant shift in policy, arguing in favour of a more

coordinated approach in both fiscal & monetary policy, to support economic

growth. Over the next few months, this is likely to result in an increase in on-

& off-balance-sheet fiscal policy measures in order to promote investment in

infrastructure (annual growth of which was down sharply at 3.3% in H1 from an

average of 17.8% over 2012-17). We should also exp. further liquidity injections

& an additional 100bp of cuts in the RRR to boost credit & limit the chance of

corporate defaults. This is likely to lead to a further decline in short-term

interest rates & will keep downward pressure on the yuam. Money mkt rates have

already dropped notably - in the past month both the 7-day repo & the 3-month

SHIBOR fell considerably. With the changes in its policy stance, the PBoC has

now committed to work together with commercial banks to increase lending to

targeted areas."