Big Bull Market Ahead? Weak August Data Fuels Expectations of Sweeping China Stimulus

TradingKey - Slowing growth in China’s industrial output and retail sales in August is fueling expectations for a new round of large-scale economic stimulus. As September marks a critical juncture for whether China’s stock market will enter a slow bull or fast bull phase, investors are anticipating a scenario of “weak economy, strong policy, and jittery equities.”

On Monday, September 15, China’s National Bureau of Statistics reported:

• August retail sales: Up 3.4% YoY to RMB 3.9668 trillion, below July’s 3.7% and the 3.8% forecast
• Industrial production (above-designated size): Up 5.2% YoY, weaker than July’s 5.7% and below the 5.6% consensus

For the first eight months of the year, national fixed asset investment rose just 0.5% YoY, down 1.1 percentage points from January–July — the lowest since 2020, excluding pandemic-affected periods. In August alone, fixed asset investment fell 0.20% MoM.

The NBS noted that while macro policies are working in concert and the overall economy remains stable, external uncertainties remain high, and the Chinese economy still faces significant risks and challenges.

Economists commented that recent data confirm a sharp slowdown in China’s second-half 2025 economic momentum, particularly in investment.

After growth of 5.4% in Q1, 5.2% in Q2, and an above-expectation 5.3% for H1, market expectations for further fiscal stimulus and monetary easing have weakened compared to early-year optimism. While economists broadly maintain a 5% growth forecast for Q3, they warn that Q4 growth could face greater pressure.

Mizuho Securities expects China’s GDP growth to slow notably in Q3. Given the high base effect from Q4 2024, without major stimulus, growth in late 2025 could slow more sharply — potentially threatening the government’s 5% annual growth target.

Bloomberg Economics said two consecutive months of weak data suggest the slowdown is driven by structural, not temporary, factors. The clearest warning sign comes from slumping investment, highlighting renewed weakness in real estate and limited effectiveness of government-led spending as a growth driver.

In the first eight months of 2025:

• Real estate development investment: Down 12.9% YoY, widening from a 12.0% drop in January–July
• New home sales area: Down 4.7% YoY
• Developers’ available funds: Down 8.0% YoY

At its meeting on July 30, the Politburo stated that macro policies would continue to strengthen in the second half, with timely and intensified efforts. It emphasized implementing a more proactive fiscal policy and a prudently loose monetary policy to fully unleash policy effects.

Given this policy tone, analysts at Dongfang Jincheng said the government may accelerate infrastructure investment. With the full impact of U.S. high tariffs now emerging and weaker external demand, exports could turn negative in Q4 — making infrastructure investment an even more critical economic stabilizer.

Is a Sustained A-Share Rally in Sight?

Cinda Securities believes September is the turning point between a slow bull and fast bull market for Chinese equities — and current sentiment is deeply divided.

From the slow bull perspective, the Shanghai Composite Index has already reached the upper limit of typical annual gains seen in past slow bull markets over the past year. Historically, this suggests limited upside potential over the next six months.

From the fast bull view, after a brief consolidation, the market could resume a sustained upward trend.

The firm argues that under policy catalysts and favorable liquidity dynamics, the market has a high probability of entering a major bull phase. Supporting evidence includes:

• Periods when market financing shrinks below corporate dividend payouts
• The introduction of high-level policy guidance aimed at boosting capital market development