EFTA01459007.pdf

6 December 2015 Update: China Monthly: Rising challenges will trigger more policy easing in 2016 divergence in monetary policy between China and US China: Deutsche Bank forec.5-i . will likely make financing of external debt increasingly 2014 2015F 2016E 2017F more expensive. According to the BIS data, as of June National Income 2015, China's cross-border borrowings were around Nominal GDP (USD bn) 10,357 10,924 11,218 11,887 USD1.2trn in Q2 2015. Although it is likely the 3Q Population (m) 1,369 1.376 1,382 1,388 number would have declined, the overall size of short- GDP per capita (USD) 7.563 7,939 8.115 8,562 term debt remains quite sizeable. Second. China is likely to continue to face the impossible trinity — Real GDP (YoY%)' 7.3 7.0 6.7 6.7 explicit monetary easing through interest rate/RRR cuts Private consumption 8.5 7.6 7.7 7.9 directly conflicts with its FX policy to keep USD/CNY Government consumption 4.4 7.2 7.2 7.2 spot stable, while opening up the capital account. In Gross capital formation 7.2 6.3 6.1 6.1 our view, the persistent desire to limit CNY weakness Export of goods & services 4.7 -1.2 5.0 5.6 will continue to increase the risk of misalignment in Import of goods & services 2.7 -103 7.2 7.5 monetary conditions with fundamentals, increasing vulnerability to possible policy mistakes and triggering Prices, Money and Banking further capital outflows. We believe the Chinese CPI (YoY%) eop 1.5 1.5 1.8 1.9 authorities will have to be more accommodative to a CPI (Yor)61ann avg 2.0 1.4 1.8 13 weaker RMB so that they can ease monetary policy Broad money (M2) sop 12.3 13.6 12.7 12.4 more to help the slowing economy. Bank credit (YoY%) eop 13.4 14.7 14.0 13.9 Fiscal Accounts (% of GDP) Limn Liu, Hong Kong, ME Budget surplus -1.8 -3.2 -3.5 -3.5 Perry Koiodjoia Hong Kong Government revenue 22.0 22.5 22.5 22.6 Government expenditure 24.1 25.7 26.0 26.1 Primary surplus -1.4 -2.7 -3.0 -2.9 External Accounts (USD Merchandise exports 2,342 2,281 2,372 2,474 Merchandise imports 1.959 1,648 1,739 1,848 Trade balance 383 633 633 626 % of GDP 3.7 5.8 5.6 5.3 Current account balance 321.3 360.5 314.1 297.2 % of GDP 3.1 3.3 2.8 2.6 FDI (net) 208.7 205.0 224.4 237.7 FX reserves (.00 3,899 3,470 3.500 3,600 FX rate (eop) USD/CNY 6.1 6.4 6.7 6.7 Debt Indicators (% of GDP) Government Debt 37.1 39.6 40.0 40.5 Domestic 36.9 39.4 39.8 40.3 External 0.2 0.2 0.2 0.2 Total external debt 8.6 15.5 16.0 16.5 in USD bn 896 1,693 1.795 1,961 Short-term (% of total) 69.4 70.0 70.0 70.0 General (VoY%) Fixed asset inv't (nominal) 15.7 10.6 10.5 10.5 Retail sales (nominal) 12.0 10.6 11.4 11.8 Industrial production (real) 8.3 6.3 6.2 6.2 Merch exports (USD nominal) 6.0 -2.6 4.0 4.3 March imports (USD 0.5 -15.9 5.6 6.2 Financial Markets (sop) Current 18Q1F 1802F 1804F 1-year deposit rate 1.50 1.50 1.50 1.00 10-year yield (%) 3.18 3.00 3.00 2.80 USD/CNY 6.40 6.40 6.50 6.70 Sate* a 08 0lebefidadva Resaro.MecnO Saints Non O) Giowa own Cr GOP owponents insyramast erne GOP oval mu ad ro annyesissay banyan bestanana oileuiscr from wyealannocaa mead al fracfry tett troaplolarlenandPAK borces Sue Page 6 Deutsche Bank AG/1-long Kong CONFIDENTIAL — PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0119196 CONFIDENTIAL SDNY_GM_00265380 EFTA01459007