Higher social spending a priority if stimulus necessary

In China, GDP growth slowed to 6.5 percent year-on-year in the third quarter from 6.8 percent in the first half of 2018. This moderation was mainly due to weaker investment and exports. Investment growth continues to decelerate as the economy transitions to a new growth path which is increasingly dependent on domestic consumption.

Weaker global trade momentum and trade policy tensions have weighed on exports. China's exports to the US which are subject to 25-percent tariffs have declined. Growth in exports subject to 10-percent tariffs has so far remained robust but is expected to slow too.

Financial markets have declined. The Shanghai Composite Index lost 20 percent and the renminbi fell by about 6 percent against the US dollar this year. Small net capital outflows were recorded in the third quarter, as foreign investors reduced sharply bond and stock purchases.