J.P. Morgan Chase, an investment bank, reported that raising China's GDP forecast from 6.2% to 6.4% this year will reduce the uncertainty of China's exports in the near future, as short-term industrial production activities show signs of improvement, further policy support and the prospect of a Sino-US trade negotiation agreement in the coming months.
The Bank expects that the current tariff situation will be maintained in the foreseeable future and that the United States and China will reach some details in the coming months, including China's commitment to substantially increase imports from the United States, expand market access, and make some improvements in intellectual property rights. In addition, officials in both countries have indicated that exchange rate policy may be part of the agreement, so the bank expects the CNY = CFXS exchange rate of the renminbi to remain stable for the rest of the year, at 6.65 at the end of the year.
JPMorgan Chase reported that China's economic growth momentum has been set and improved moderately at the beginning of this year, with better industrial production and investment than expected in January-February. Investment power is mainly led by real estate investment in fixed assets, while capital investment in fixed assets is good, but manufacturing investment in fixed assets is weak. In addition, the official purchasing managers index (PMI) of China's manufacturing sector rebounded significantly in March, indicating that recent manufacturing activity has maintained good, while forward-looking indicators such as new orders or foreshadowing further improvements in manufacturing activity in the second quarter.
According to the report, the Chinese government has set a deficit rate of 2.8% this year, but the bank believes that the actual fiscal deficit will exceed the target, with a forecast of 3.0%. In addition, Chinese authorities expect M 2 and credit growth to match nominal GDP growth this year. JPMorgan Chase expects total social financing (TSF) to grow by 2% this year as monetary policy tends to be loose. The People's Bank of China is expected to reduce the deposit reserve ratio by 50 basis points in April and the third quarter respectively.
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