MNI INTERVIEW: China Headwinds Seen Sapping Imports: Advisor

     BEIJING (MNI) - China's economy still faces headwinds from weak property

and automobile sectors along with slowing global demand, an official advisor for

a government-backed think tank told MNI in an interview, adding that he expected

weak exports to weigh on imports as well.

     Despite PMI data showing signs of a pick-up, growth in Q1 will be soft,

impacted by the follow-through from a weak 2018, said Niu Li, deputy director of

the Economic Forecasting Department at the National Information Center,

affiliated to the National Development and Reform Commission.

     Niu is concerned the economy will remain weak into Q2, with car sales

struggling, affecting output in associated industries, and property investment

also expected to remain low as regulations weigh on sentiment.

     Q1 GDP, due for publication on April 17, will likely be 6.3% in annualised

terms, down a touch from 6.4% in Q4 '18, helped by stimulus started in the

second half of 2018, he said, noting that the effects of recent central bank

liquidity injections take time to show up.

     --PMI PICK-UP

     The unexpected recovery in March PMI data reflected improved market

sentiment over the U.S./China trade talks and Beijing's policy stimulus

measures, but hard data, including industrial profits, was now largely dependent

on price performance, Niu said.

     It is too early to call a bottom for the economy, as PMI data only

reflected the outlook in the manufacturing sector, he said.

     Global demand keeps weakening, hurting the export sector, he said, adding

that he was concerned that both imports and exports could see only low

single-digit growth this year, of around 9% and 5% respectively. Many of China's

imports are supplies used to produce goods for overseas shipment.

     "Weak export demand will drag down imports," Niu said, adding that, while

the trade surplus will continue to shrink, China will not register a current

account deficit.

     The government is likely to continue its push for deleveraging, as the

prevention of financial risk remains a top priority, the advisor said.

     Nine corporate bond defaults were reported in Q1, higher than in the same

period a year ago, but lower than in Q4. The defaults were due mainly to falling

profits as producer prices fell, even as liquidity and financing improved, Niu

explained.

     However, consumer prices should remain a focus for officials, rather than

producer prices, Niu said, predicting CPI of around 2% in 2019, a level which

would not impact policy making.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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