- CGB yields continue to slide. The PBoC cut the one-year loan prime rate by 0.10 percentage points on Monday to 3.45%, but kept the five-year (mortgage reference) rate unchanged at 4.20%, defying expectations of a broader loosening (page 2)
- As the Chinese CPI falls into deflation. To be clear, core inflation (ex-food & energy) firmed to 0.8% last month, led by services inflation (1.2%): the picture is more nuanced (page 10)
- Nevertheless, contagion fears continue to grow, with shadow banking and LGFVs grabbing the recent headlines
- House price drops have accelerated again, falling faster in the secondary market (down 0.47% m/m and 3.06% y/y). The value of home sales contracted 24.3% y/y in July too (page 17)
- Very weak Chinese total social financing data last month (pages 13-14)
- Industrial production, fixed asset investment and retail sales all came in below expectations in July too (pages 4 & 6)
- China decided to stop publishing youth unemployment figures, increasing the opacity of the economy and continuing the trend of discontinuing economic data series
- Calls for ‘even more stimulus’, to ‘revive the economy’ grow
- But government debt has jumped as a share of GDP: the fiscal space for huge government-financed spending programmes has diminished (page 15)
- Producer prices remain in deflation, down 4.4% y/y (page 12)
- Record deflation in the manufacture of motor vehicles (-1.5% y/y). China’s competitive advantage in renewables, and the manufacture of goods related to the green energy transition, grows (page 22)
- Trade surplus in transport equipment hit a record $145bn in July (page 21)
- China exported a record 4.51 million motor vehicles in the twelve months to July, and a record 5.16 billion solar cells, as export prices slide (page 22)
- China’s trade surplus stood at $873.2bn in the twelve months to July, not far below the peak of April 2023 ($928.7bn). But China’s trade surplus with the US continues to narrow, falling to $346.6bn on a 12-month moving total basis, as China grows exports to Belt and Road countries (pages 18-19)
- China’s share of exports to EU, Japan and the US has fallen to the lowest since March 1993. China’s export share to all advanced economies fell to 58.1% in April, as emerging & developing economies take up a greater share of shipments from the mainland (page 24)
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