China: Growth risks rise with softer demand – Standard Chartered

Standard Chartered economists Hunter Chan and Shuang Ding assess China’s July-August data and conclude that domestic demand weakened while production held up. They note softer household consumption, ongoing contraction in manufacturing and real estate investment, and stronger Industrial Production supported by external demand. The bank highlights downside risks to Q3 GDP and expects faster budget implementation and continued supportive monetary policy.

Domestic demand weakens as production holds

"China’s August real activity data suggests that domestic demand weakened further, while production activity accelerated, partly thanks to resilient external demand and the AI supercycle."

"We estimate that monthly GDP growth picked up in August, mainly thanks to solid IP growth, while staying below the bottom of the annual growth target range of 4.5%-5.0%."

"We see downside risk to our Q3 GDP growth forecast of 4.6% y/y."

"We expect the government to accelerate budget implementation with faster spending and bond proceeds deployment, supporting a stabilisation in infrastructure investment."

"Supportive monetary policy will likely continue to keep liquidity ample."

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