On August 14th, the National Bureau of Statistics announced the main data of the Chinese economy in July. In the context of the deterioration of Sino-US trade frictions, what is the future trend of the Chinese economy? What changes or risks are presented? What will be the impact on the next economic policy? These are matters of market concern.
Look at the investment data first. China's urban fixed asset investment from January to July increased by 5.5% year-on-year, hitting a record low, with an expected value of 6% and a previous value of 6%. It should be noted that the investment growth rate from January to July is the lowest since 1995. Judging from the investment in the previous seven months, the situation facing the domestic economy is extremely serious. From the perspective of investment, infrastructure investment in July has not improved. Infrastructure investment from January to July increased by 5.7% year-on-year, and the growth rate dropped by 1.6 percentage points from January to June. The rare "bright spot" in the investment field is that private investment has further increased, with an increase of 8.8% from January to July, and an increase of 0.4 percentage points over the growth rate from January to June. In addition, manufacturing investment increased by 7.3% year-on-year from January to July, 0.5 percentage points faster than the first half.
China’s investment growth rate has fallen to its lowest rate in 23 years, indicating that the current economic vitality is insufficient and the market’s “appetite” has deteriorated. It is worth noting that the slowdown in infrastructure investment led by the government and state-owned enterprises in the past has become the main reason for dragging investment growth. Just in 2017, China's infrastructure investment grew at a rate of 19% a year, and has now fallen from two digits growth in the past to digits growth. However, the year-on-year growth rate of real estate investment has rebounded. The national real estate development investment was 655.86 billion yuan from January to July this year, a year-on-year increase of 10.2%. Among them, residential investment increased by 14.2% year-on-year, and residential investment accounted for 70.5% of real estate development investment.
Look at consumption. In July, the total retail sales of consumer goods in the whole society was 3.0734 billion yuan, a nominal increase of 8.8% year-on-year (the actual increase of 6.5% after deducting the price factor). The total retail sales of consumer goods reached 210.752 billion yuan from January to July in 2018, a year-on-year increase of 9.3%. The monthly growth rate of total social retail sales has basically remained above 10% in 2017.However,in 2018, only the social retail consumption growth rate in March exceeded 10%, and the other monthly growth rates gradually decreased from 9% or above to 8% or above. Commodity consumption is only a part of Chinese consumption. According to the analysis of ANBOUND, the proportion of China's commodity consumption in 2017 is about 2/3, and the proportion of service consumption is about 1/3, contrary to the US. However, domestic leisure travel, cultural entertainment, health and wellness and other service consumption spaces are gradually opening.
Look at the import and export data. According to Foreign Trade Department of the Ministry of Commerce of PRC, China's import and export volume reached 16.72 trillion yuan (2.61 trillion US dollars) from January to July in 2018, the highest level in the same period. Among them, the export from January to July was 8.89 trillion yuan, an increase of 5%; the import was 7.83 trillion yuan, an increase of 12.9%. The trade surplus in the first seven months was 1.07 trillion yuan, a year-on-year decrease of 30.6%. Judging from the situation in the previous seven months, the pulling effect of the trade surplus on the Chinese economy will be weakened. It can be expected that China's trade situation will further deteriorate in the second half of the year due to the intensified trade friction between China and the United States, especially the slowdown in exports will become more severe.
Industrial performance is not good. In July, the added value of domestic industrial enterprises above designated size increased by 6.0% year-on-year, which was the same as that in June. The added value of industrial enterprises above designated size increased by 6.6% year-on-year from January to July, and the growth rate dropped by 0.1 percentage points from January to June.
Judging from the economic data in July, the major economic indicators continued the trend of slowing economic growth in the first half of the year, and the downward pressure did not ease significantly. Some research institutions are pessimistically expecting that the turning point of China's economic downturn is further confirmed, coupled with the continued decline in social financing growth in July, and the road to economic bottoming in the second half of the year is still a long road. In fact, this year's monthly economic data changes are not unexpected. At the end of last year, ANBOUND macro research team has predicted the overall slowdown of China's economy in 2018. The current monthly data is only reflected at the end of this trend.
For the market, what is important is how the macroeconomic policy will be adjusted in the face of increased economic downward pressure. There are now more and more signs that the central government is gradually loosening macroeconomic policies. The focus of the policy has shifted from de-leveraging to stable leverage, from restructuring to steady growth. If the downward pressure on the economy increases, the expansionary policy will intensify. As the National Bureau of Statistics said when investing, in the second half of the year, with the implementation of the policy, the approval of various projects will accelerate, and the decline in investment in infrastructure construction is expected to stabilize.
Final Analysis Conclusion:
China's economic data continued its slowdown in July, and the macroeconomic policies in the second half of the year will be further expanded. As the expansionary policy intensifies, the requirements for the implementation level of easing policies will become higher and higher.
