Weakening trend continues in November

The Conference Board Leading Economic Index^®(LEI) for China suggests growth will continue to weaken in the near term. American import tariffs have started to manifest in China’s trade data; the November “Singles Day” e-commerce festival didn’t revive retail sales growth, and industrial production growth fell faster than expected. More policy easing measures are expected in 2019 to prevent a possible confidence crisis. As the risk of an "overslowing" economy continues to rise, the policy focus appears to be pivoting from de-risking to pro-growth. However, as “targeted measures” translate into real policy loosening, we expect the 2019 downturn to be more moderate than it would be otherwise. We continue to believe that policy measures now underway will prevent a sharp downturn in the short term, but they won’t restore growth in a sustainable way.