• A broad range of China’s economic indicators – including industrial production, fixed asset investment and retail sales – were softer in July, following a surprise pickup in June. A trend across these two months points to a continued gradual slowdown, even before the next phase of US tariffs (and China’s retaliatory measures in response). For now, our growth forecasts remain unchanged, at 6.25% yoy in 2019, 6.0% in 2020 and 5.8% in 2021 – on the assumption of a domestic policy response, however the deteriorating US-China trade relationship continues to highlight downside risk.
• Following a surprise upturn in June, China’s industrial production growth slowed significantly in July – increasing by 4.8% yoy (compared with 6.3% previously). China’s major manufacturing surveys were less negative in July, but both surveys continue to point to negative trends in export orders.
• China’s fixed asset investment growth slowed in nominal terms, however this was partially offset but producer price deflation. Our estimate of real investment growth was 5.7% yoy in July (down from 6.3% previously). There has been a noticeably weaker trend for investment by private sector firms in recent months – pulling back from growth of around 9% yoy (on a three  month moving average basis) in February to 4.8% yoy (3mma) in July.
• China’s trade surplus narrowed slightly in July – totalling US$45.1 billion, compared with US$51.0 billion previously. Both exports and imports grew considerably month-on-month, with the increase in imports more sizeable. The trade relationship with the United States has deteriorated further, with President Trump announcing additional tariffs (initially at 10%) on the final phase of Chinese exports, commencing 1 September (or 15 December depending on the individual product). This would result in almost all of China’s exports to the US falling under tariffs.
• Real retail sales grew more modestly in July – at 5.6% yoy, down from a surprisingly strong 7.9% yoy in June. Despite the slowing trend in retail sales since early 2017, consumer confidence measures remain historically high.
• New credit issuance was considerably weaker in July than the first half of 2019 – falling by almost 18% yoy to RMB 1.0 trillion. There could be some timing issues related to this weakness growth in the month of June was particularly strong – however some observers have suggested that loan demand has declined.
• Short term interbank rates have exhibited less volatility from mid-July through mid-August – compared with a highly volatile period over the previous six months. The 7 day Shanghai Interbank Offered Rate (Shibor) has trended near 2.6% more recently – close to the trend from mid-2018 to early 2019. The 3 month rate is near its lowest level since mid-2011, albeit there is room for further easing.

For further details, please see China’s economy at a glance – August 2019