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Fast Comment ChinaJuly data more evidence of growth slowing down

  1. Past deleveraging efforts still biting
  2. Stimuli not yet visible in data
  3. Monetary policy now being eased
Past deleveraging efforts still biting
All three main monthly Chinese activity indicators were weak in July and weaker than expected by consensus. Retail sales growth fell from 9.0 percent y-o-y in June to 8.8 percent in July. Industrial production growth was steady at 6.0 percent in July, but that follows a marked decline in June. Finally, growth of fixed assets investments slowed to 3.0 percent in ordinary y-o-y terms, the lowest on record. Thus, the past deleveraging efforts and trade tensions are still impacting negatively.
Stimuli not yet visible in data
The tide of economic policies has changed recently with clear signals from China’s authorities that both fiscal and monetary policies are being loosened rather than tightened now. However, there are no signs yet of the stimuli kicking in. Investments in infrastructure projects should be among the first indicators to point upwards again, but growth slowed to below zero in July. Meanwhile, property investment growth, a little surprisingly, increased again in July even though the authorities still seem to be in tightening mode with respect to the property market.
Monetary policy now being eased
Credit figures for July also showed little sign of easier monetary policy, but the authorities have signaled that the effort to reign in financial risks and dampen shadow banking activities will be weakened ahead, which is good news for credit growth. Accordingly, credit should, with the usual lag, start to support overall economic growth late this year and into 2019.




Bjarke Roed-Frederiksen

Senior Economist

Latin America and China

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