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Fiscal boost, renminbi turnaround

Government bond issuance has picked up recently but a sizeable chunk of the proceeds have yet to be spent. Local officials will be under pressure to deploy these funds as soon as possible, which could boost near-term GDP growth by over half a percentage point.

Meanwhile, the recent reversal in the US dollar has taken pressure off the renminbi and opens the door to further monetary support, including rate cuts. Counter-intuitively, it is also proving to be positive for China’s export competitiveness. 

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