According to a report, China’s economic activity slowed more than anticipated last month, with a steep decline in investment igniting expectations that the government will provide stimulus to maintain growth in line with stated forecasts.
The People’s Republic of China (PRC) aims for an annual growth rate of about 5%. Following a steep drop in July, industrial output and consumption suffered their worst month of the year, according to government figures.
According to data issued by the National Bureau of Statistics and referenced in a Financial Review story, production at Chinese mines and factories increased 5.2% this month compared to a year earlier, the weakest increase since August 2024.
A fragile job market and real estate crisis have slowed domestic demand, and Chinese manufacturers are waiting for more certainty on a US trade deal.
July saw an increase in industrial output of 5.7%. Retail sales, a measure of consumption, cooled from a 3.7% increase in July to 3.4 percent in August, the slowest growth since November 2024. The market had predicted a 3.9% increase.
Fixed-asset investment also had its lowest performance outside of the pandemic, growing at a slower-than-expected 0.5% annual growth rate in the first eight months, down from 1.6% in January to July.
According to analysts, a solid start to the year maintains the growth forecasts within reach, but more stimulus support would be required to guarantee a strong year-end.
Despite the challenge of estimating the effects of the consumer loan subsidies that will take effect in September, the prognosis remains hopeful.
A 50 bps Reserve Requirement Ratio (RRR) decrease and another 10 bps rate cut are likely in the upcoming weeks, according to analysts quoted in several sources.
Reforms including budget tax cuts, MPC rate decreases, and GST rationalization have the ability to maintain the growth momentum after India’s GDP growth recovered significantly in Q1.
According to analysts, there is a good chance that corporate earnings will increase by more than 15% in FY27, which would cause FPI sentiments to improve.
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