China's Economic Opening Reds Enhance Market Confidence

China's economy exceeded previous market expectations in the first quarter, indicating that positive policy actions have begun to drive the fundamental stabilization rebound. China's economic "quality enhancement" has been steadily upgraded, its economic structure is speeding up and optimizing, the momentum of high-end development of manufacturing and service industries has increased, and new structural opportunities are being fostered. After the macroeconomic fluctuations in 2018, China's economic data in the first quarter of 2019 opened up well beyond the general expectations of the market, further boosting investors'confidence in China's economic and capital markets. In fact, before the quarterly data were released, Dong Liwen, chief global investment strategist at Bellade Group, said that his confidence in China's steady economic recovery from the first quarter was growing, given the year-on-year growth in credit and the effectiveness of fiscal stimulus measures.

After the release of macro-data in the first quarter of this year, the confidence of major institutions in China's economy has increased significantly.

The report issued by the Australian New Zealand Bank indicated that, in view of the improvement of China's economic prospects, the annual economic growth rate has gradually stabilized and recovered, thus raising the expected annual economic growth rate to 6.4%, which means that the annual economic growth rate of China may reach the upper limit of the official target range of 6.0% to 6.5%. Similarly, Standard Chartered Bank had a 6.4% outlook for China's economic growth in 2019, which was higher than market expectations. After the quarterly data was released, Standard Chartered stressed that its full-year growth expectations would be revised upwards in view of the stronger-than-expected growth data in the first quarter.

For the growth data of the first quarter, Cheng Shi, chief economist of ICBC International, said that China's economy in the first quarter exceeded the previous market expectation median, indicating that positive policy actions have begun to drive a stabilizing rebound in the fundamentals. At the same time, Cheng Shi said that compared with the stabilization of economic data, China's economic "quality" has maintained a steady improvement. He said that in the first quarter, the investment growth rate of high-tech manufacturing industry was significantly higher than that of the overall manufacturing industry, and the investment growth rate of high-tech service industry was also significantly higher than that of the overall tertiary industry. Meanwhile, in the first quarter, the utilization rate of national industrial capacity rose to the second highest level since 2013. This shows that China's economic structure is speeding up and optimizing, the momentum of high-end development of manufacturing and service industries is increasing, and new structural opportunities are being fostered.

Citibank believes that recent economic data in China show that the effect of stimulus policy has begun to emerge. The rebound in economic growth is in line with Citigroup's previous expectations. Without the threat of inflation or a strong dollar, central banks in emerging Asian economies have more policy space. In addition, mainstream central bank policies also tend to support economic growth. China's economic growth momentum may continue throughout the year. At the same time, the overall growth of Asian countries and regions is likely to outperform the rest of the cycle. Undoubtedly, the market generally believes that the stabilization of China's economic growth in the first quarter is mainly due to the support of fiscal and monetary policies, especially infrastructure investment supported by "broad fiscal". However, the slowdown in consumption growth since the second half of last year has attracted attention, and the first quarter data also show a slight weakness in consumption data. How will the pulling power of Chinese consumption become another focus of attention in the future? Standard Chartered Bank said that the problem of consumption growth did not cause structural changes in China's economic momentum. Consumption is still the main driving force for growth, China's labor market is still robust, and real income growth is relatively better than the same period last year. In this regard, ICBC International believes that consumption will drive the economy more strongly after the second quarter. Cheng Shi said that looking forward to the second quarter, two major factors are expected to promote a moderate revival of the consumer engine, which will bring more than expected boost to "steady growth". The first is the "wealth effect". Since the beginning of 2019, the A-share market has risen by more than 30%, not only in terms of earnings, but also in terms of resilience, it has withstood the pressure of global risk preference fluctuations at the end of March. The rise of China's stock market can not only drive the growth of residents'wealth, but also improve residents' expectations of the future trend of the economy. In view of this, driven by the "wealth effect", the consumption capacity of Chinese residents is expected to recover steadily from the second quarter. The second is the restoration of consumer willingness. While "wealth effect" improves consumption ability, residents'consumption intention is expected to be repaired in multiple ways. On the one hand, as the biggest uncertain factor in China's economy in 2019, the Sino-US economic and trade negotiations have been steadily advancing for several rounds, and overall released positive signals, which are expected to achieve positive results in the second quarter. This change will further consolidate the comparative advantages of China's economic fundamentals and greatly weaken the residents'motivation for preventive savings. At the same time, with the acceleration of new urbanization, it will not only stimulate the consumption demand of commodities related to housing and automobiles, but also inject new impetus into the consumption of services such as recreation, tourism, education, catering, housekeeping services, medical and cosmetic services.

Therefore, although there has been a slight fluctuation in Chinese consumer confidence since the beginning of the year of 2019, it still maintains a historic high overall and is expected to further transform into consumer behavior in the future.

Affected by the improvement of the above-mentioned basic factors, Bellade believes that the improvement of China's economy is expected to drive global economic growth, especially in Asia. In the stock market, economic reforms and stimulus policies favour emerging market stocks. Active measures taken by China to improve consumption and economic activities will help offset the adverse effects of trade disputes, and Asian emerging markets have great opportunities. In the bond market, China's economic growth is expected to be good.