CICC Foresees Near-term Economic Weakness Due to Regulatory Tightening


One of China’s leading investment banks expects macroeconomic data to weaken in the medium-term, following the release of official data indicating faltering performance.

China International Capital (CICC)’s economic research team expects  near-term economic performance to weaken slightly as regulators continue to crackdown on the financial sector and push deleveraging of the market.

CICC notes that since the launch of a crackdown by regulators led by CBRC in March, financial conditions have tightened markedly, with rises in interbank rates and short-term financing costs.

While CICC predicts that inflation will be weak and risk premiums may rise, it does not foresee long-term economic weakness.

From a medium-to-long term perspective CICC analysts note that current economic conditions have improved in multiple respects compared to the last modest downturn in 2013, and that the resilience of the Chinese economy has improved.

They expect the Chinese economy to be better capable of withstanding  deflation and decelerating growth created by pressure from financial regulators.

Its prognosis arrives just after the release of new data by China’s central bank indicating that year-on-year industrial added value dropped from 7.6% in March to 6.5% in April, falling short of the consensus forecast of 6.9%.