BofA Merrill Lynch expected China's growth to moderate in 2H even before the recent escalation of US-China trade tension. While the next tariff hike was delayed till mid-December, further escalation of trade tension and tariff hike remain major downside risks.
The impact on the external sector will likely kick in more notably in 1Q 2020, said the research house. With stiffer headwinds on exports as well as investment demand, BofAML believes more policy easing is warranted to stabilize growth.
It expects the PBoC to cut benchmark interest rates twice in 2019, by 25bps each in September and December, and by 25bps in 2020.
BofAML also expects policy loosening to resume in infrastructure investment, consumption stimulus and monetary easing, before gradually shifting to cover property market as well.
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