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Fast Comment ChinaGrowth slowdown resumes

  1. Across-the-board deterioration of July data
  2. June uptick was only temporary
  3. Growth headed for further declines
Across-the-board deterioration of July data
All the main indicators of Chinese economic growth weakened more than expected by consensus in July. Industrial production growth fell to just 4.8 percent y-o-y, the lowest on record except for a few New Year-distorted months back in the early 2000s. Retail sales growth fell from 9.8 percent y-o-y in June to 7.6 percent, a decline that can be only partly explained by the fading of the boost from rebates on older cars ahead of implementation of new emissions rules. Finally, fixed investment growth disappointed by falling from 6.3 percent to 5.2 percent in ordinary y-o-y terms (our own calculation).
June uptick was only temporary
The overall picture is that the surprising growth uptick in June has been eliminated and that the direction continues to be downward. Looking at the sub-components of fixed investment reveals that the authorities’ preferred way of stimulating growth – infrastructure and property investments – both slowed in July. Only the industry’s fixed investment growth increased, but that is unlikely to last amid the ongoing trade war. This holds despite Trump’s decision to delay (not abolish) the imposition of import tariffs on some Chinese goods.
Growth headed for further declines
We foresee growth continuing to slow ahead as the trade war persists. Further economic stimulus is likely to be announced, but this will only mitigate, and not completely counter, the impact of the trade war and the slowdown in structural growth.



Bjarke Roed-Frederiksen

Senior Economist

Latin America and China

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