China’s real GDP growth stabilized in Q1 (+6.4% y/y like in the previous quarter), helped by expansionary policies. The tertiary sector slowed but remained resilient (+7.0% y/y in Q1 2019 after +7.4% in Q4 2018), industry picked up speed (+6.1% after +5.8%) and the primary industry slowed (+2.7% after +3.5%). Monthly data show that the stabilization came from an improvement of activity in March. Real industrial production rose by +8.5% y/y in March (after +5.3% in Jan-Feb), retail sales were up +8.7% y/y (after +8.2%) and urban investment continued its improvement (+6.3% YTD y/y in Jan-March 2019 after +6.1% in Jan-Feb), driven by SOEs and government spending on infrastructure. Looking ahead, advanced indicators point to an improvement of activity growth: Business surveys in both manufacturing and services point to expansion and financing indicators are improving. M2 growth accelerated to +8.6% y/y in March (after +8% in February). Total social financing outstanding increased by +10.7% y/y in March (after +10.1% in February). Against this background, we maintain our forecasts of +6.4% GDP growth in 2019 (after +6.6% in 2018).
