China needs to address slowing growth more aggressively, fund manager says

KEY POINTS

• Rising prices and hot weather in China, which has led to power rationing in some parts of the country, will affect economic growth, said Mary Nicola of PineBridge Investments.
• Policymakers in China need to be "more aggressive" in supporting the economy before markets will be convinced that growth will improve, she said.
• Thus far, the government has cut interest rates and taken targeted steps to support the property sector.

Policymakers in China have to be "more aggressive" in supporting the economy before markets can be convinced that growth will improve, according to one portfolio manager.

Mary Nicola of PineBridge Investments said rising prices and scorching heat in China, which led to power rationing in some parts of the country, will affect economic growth.

"We thought, especially after the lockdown in Shanghai, that the worst would be behind us," she told CNBC's "Street Signs Asia" on Tuesday.

"But potentially … with the concerns about inflation, with concerns about the heatwave trickling in, it could mean that the policymakers will have to act a little bit more decisively and increase some of the stimulus," she said.

Policymakers are going to have to act a bit more responsively, more decisively in terms of something a little bit more than what we've seen so far, to mitigate some of that growth pressure.

Mary Nicola

Portfolio manager, PineBridge Investments

Thus far, the government has cut interest rates and taken targeted steps to support the property sector.

"That's all positive, but in our view, there needs to be something … more aggressive for [the] market to feel a little bit more comforted that growth is going to pick up in China," Nicola said.

She said China's growth hasn't been as strong as expected despite the steps taken by authorities and more needs to be done.

"The key thing here is, as growth slows, that policymakers are going to have to act a bit more responsively, more decisively in terms of something a little bit more than what we've seen so far, to mitigate some of that growth pressure," she said.

Investment banks including Goldman Sachs and Nomura cut China's growth targets this year as the economy was impacted by Covid measures.

In late July, the country's top leaders said they would focus on stabilizing prices and employment in the second half of the year, downplaying the importance of the GDP target of about 5.5%.

China's GDP grew 0.4% in the second quarter this year compared with a year ago.

— CNBC's Su-Lin Tan and Evelyn Cheng contributed to this report.