H2 macro outlook: New drivers of China's growth

Looking ahead to China's economy in the second half, robust exports are expected to remain an important driver of economic growth, while domestic demand will generally remain stable. PPI inflation is expected to remain elevated, while CPI inflation is likely to stay moderate. As prices continue to recover, the full-year GDP deflator is expected to reach 1.1 percent.

GDP growth is expected to dip before recovering in the second to fourth quarters, with expansion forecast at 4.5 percent, 4.6 percent and 4.8 percent, respectively. We forecast China's full-year real GDP growth at 4.7 percent, with nominal GDP growth at 5.8 percent. USD/CNY could hover around 6.7-6.8 this year, supported by China's current account surplus and stronger corporate willingness to convert foreign-exchange receipts.