China: Fiscal support to offset weak demand – Standard Chartered

Standard Chartered economists Hunter Chan and Shuang Ding note that China’s July real activity data showed weaker momentum, with estimated monthly Gross Domestic Product (GDP) growth dropping below 4.3% year-on-year. They highlight a divergence between strong supply and weak domestic demand, as well as relatively strong external demand. They expect fiscal policy to take the lead in H2, with faster budget implementation and continued accommodative monetary policy.

Growth slows as policy support expected

"China’s July real activity growth slowed more than the market expected. We estimate that monthly GDP may have dropped below 4.3% y/y in July."

"Overall, the economy continued to show diverging performance between strong supply and weak demand, and relatively strong external demand and weak domestic demand."

"The July Politburo meeting confirms our view that policy support in H2 will focus on existing policies."

"Broad fiscal spending is likely to accelerate from a decline in H1 on faster budget implementation, boosting investment, in our view."

"Monetary policy will likely continue to keep liquidity ample. We maintain our call for a 25bps reserve requirement ratio (RRR) cut in Q3."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)