Summary

William believes Beijing views the crisis as a strategic opening to promote China’s role in the global economy. In terms of recent economic activity there are some signs of a bottom in China as various short-term activity measures approach pre-holiday levels. However, there could very well be another hit form the external demand shock and a secondary outbreak of COVID-19. In an attempt to plug the economic hole William noted credit data has picked up; short term corporate loans, discounted bill issuance, issuance of urban development construction bonds and Policy Bank loans - all supportive of infrastructure and construction, but not enough so far to offset the economic impact from the hit to consumption. PRC Macro forecast a decline of 12% in GDP on an annualised basis. Song spoke about the policy response sequence which started on February 17th with the PBoC lending programme and tax relief. March 1st saw a reopening of parts of the economy. March 27th was significant in that there was an about turn at Politburo meeting with agreement to issue central government bonds. Song is confident that ultimately stimulus will not disappoint investors and he estimates it to reach 10% of GDP. It will drive infrastructure spending 23% higher - ultra-high voltage power systems, 5G networks, and affordable housing projects will all benefit substantially.

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