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Fast Comment ChinaThe downward trend for activity growth is back

  1. Gradual growth slowdown continues
  2. Only bright spot in July: Infrastructure investments
  3. We raise our GDP forecast
Gradual growth slowdown continues
Chinese economic data was fairly strong over the summer, but the just published July data was weaker than expected by consensus. The gradual growth slowdown seems to continue.
Only bright spot in July: Infrastructure investments
Industrial production growth fell from 7.6 percent y-o-y in June to 6.4 percent in July. In addition, retail sales growth declined. The biggest negative surprise came from fixed investments, where the year-to-date annual growth rate fell from 8.6 percent to 8.3 percent in July. That masks, according to our calculations, a steeper drop in the standard annual growth rate from 8.8 percent y-o-y to 6.5 percent y-o-y, the weakest in a year (see first Chart). Fairly strong infrastructure investments are not able to compensate for falling growth of investments in the manufacturing sector and property investments (see second Chart).
We raise our GDP forecast
Following a stronger-than-expected Q2 GDP figure published earlier in the summer, we raise our forecast for official full-year 2017 GDP growth to 6.7 percent. However, we continue to foresee a gradual slowdown during the remainder of the year as the authorities’ efforts to dampen credit growth hits overall activity. Note that stronger-than-expected reported growth leaves room for a continued deleveraging effort without jeopardising the government’s 6.5 percent growth target.



Bjarke Roed-Frederiksen

Senior Economist

Latin America and China

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