MNI POLICY: China Q3 GDP May Dip Before Q4 Rebound: Advisor

     BEIJING (MNI) - China's third-quarter growth may slow to 6.1% and return to

6.2% in Q4, with whole-year growth at 6.2-6.3%, according to Zhang Yuxian,

director general of Economic Forecasting Department of the State Information

Center, an advisory group under the National Development and Reform Commission.

The economy expanded 6.3% in the first half.

     Here are key points made by Zhang and two other government-affiliated

advisors at a briefing in Beijing on Wednesday night.

     - The impact from CNY2 trillion tax reduction implemented earlier this year

may bump growth by 0.8 percentage point, and be reflected in Q4's modest

rebound, Zhang said, also highlighting monetary policy moves and infrastructure

investment financed by special bonds.

     - China is likely to further cut rates to reduce lending costs, such as by

lowering the Medium-term Lending Facility rates, as rate cuts by other central

banks leave more room for the PBOC to follow suit, said Zhang, declining to say

when he thought cuts may come.

     - Contrary to speculation, China isn't waiting for the outcome of the 2020

U.S. presidential election to make a trade deal and should assume that President

Donald Trump wins a second term, said Chen Wenling, the chief economist at the

China Center for International Economic Exchange.

     - China now has the upper hand in the trade war, Chen said, adding that

Beijing won't, nor does it need to, concede too much to U.S. demands. The

outcome from next round of talks may follow the Xi Jinping-Trump consensus

reached at the G20 summit in Osaka, with some compromises reached, Chen said.

The U.S. may agree to further delaying new tariffs or ease restrictions on

Huawei, Chen said, while China may agree to further purchases of agricultural

goods. However, buying soybeans is a commercial decision so the quantity may not

immediately return to previous levels as other countries are providing

alternative supplies, Chen said.

     -The trade war has significantly impacted on China's manufacturing, but

even more so on U.S. manufacturers located there, Chen noted. She pointed to the

shift in low-level manufacturing out of China over recent years, accelerated by

the trade war, but added that high-end manufacturing has remained in China and

is solid.

     - While China's economic growth rate is slowing, one needs to look at the

absolute quantity, which is twice that of U.S. growth, and given China's

stagnant labor supply, the slower growth can still ensure employment, Chen said.

     - According to Chen, China remains best positioned in terms of growth as it

has refrained from excessive credit lending, while the U.S. and Eurozone have

carried out rounds of QE, leading to negative rates in some countries.

     - In previous years, China has focused on stimulating capital-sensitive

sectors like consumer spending and industries, but now it is directing financing

to balancing its economy, looking at innovation, greening projects and poverty

reduction, therefore the impact from stimulus may not be immediately apparent by

the indicators, said Zhang Yansheng, the chief research fellow at the China

Center for International Economic Exchange.

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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

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