China Center Data Flash: Momentum is weak as China enters 2016

Data Flash is a brief interpretive summary of China’s official monthly economic data release.

• Investment and policy stasis ahead of March NPC is set to yield a very weak Q1.
• A rather significant RMB devaluation, possibly to 6.9 USD-RMB, is considered very likely over the quarter to enable the PBoC to regain control of monetary policy.
• In the wake of devaluation, “overshoot” dynamics in terms of sentiment toward the economy are likely to play out. MNCs should be aware of this phenomenon, and not get distracted.
• From Q2 on, growth is likely to stabilize as policy measures kick in, especially enhanced fiscal spending; however, a significant acceleration of momentum is unlikely.