On 5 March at the 13th National People's Congress (NPC), China lowered its economic growth target from around +6.5% to a target band from +6.0% to +6.5%. The authorities acknowledged that the economy is facing mounting risks and decisive actions are needed. Externally, the export outlook is hindered by trade uncertainties. Domestically, slower expansion in consumption, a lack of investment dynamics and elevated financial risks act as a drag on growth. Against this background, the government announced a pro-growth budget and raised its fiscal deficit target to -2.8% of GDP in 2019 (from -2.6% last year). The announced measures aim at reducing the tax burden (RMB2tn) and boosting infrastructure spending (RMB2.15tn). On the monetary side, better capital allocation to the private sector and financial prudence will be the main priorities. In that context, we expect economic growth in China to accelerate timidly from +6.2% y/y in the first quarter to +6.4% y/y in the second half of this year.
