China’s July Data Indicates Steady Growth Amidslowing Investment, According to Reuters

By Elias Glenn

BEIJING (Reuters) – Global investors, currently displaying caution, may find some reassurance in the stable growth anticipated from a range of upcoming Chinese data. Yet, challenges such as weak demand, a slowdown in investment, and increasing debt levels persist as significant issues for the world’s second-largest economy.

Recent months have seen a boost in construction activities, resulting in increased workloads for steel mills and cement plants, which has somewhat alleviated the overcapacity problems that the government has committed to addressing. However, many economists warn that this rebound heavily relies on government expenditures and a housing market surge, raising doubts about its sustainability.

Mixed results from business surveys conducted in July indicate that while activity remains steady, it is still sluggish. There are hints of resilience among smaller manufacturers, but job losses are ongoing.

Economists surveyed anticipate that July exports dropped by 3 percent year-on-year. This represents an improvement from June’s 4.8 percent decline, yet it still highlights the troubling trend of falling shipments for 12 of the last 13 months. A depreciating yuan has not significantly aided exporters amid persistently weak global demand.

Imports are also expected to decline by around 7 percent, a slight improvement from the previous month, while China’s trade surplus is projected to decrease modestly to $47.6 billion.

Inflation pressures are likely to remain subdued despite an increase in government fiscal stimulus, with consumer inflation expected to slip to 1.8 percent and producer price decreases moderating to 2 percent, providing some relief to companies’ financial situations.

Data on money and credit is anticipated to present a mixed picture as the government attempts to control high leverage and debt levels without stunting growth. New yuan loans in July are predicted to fall to approximately 800 billion yuan ($120.5 billion), a three-month low, and the growth of outstanding loans may moderate to 13.8 percent, down from 14.3 percent in June.

The M2 money supply is expected to increase by about 11.2 percent in July, marking the slowest growth since May 2015, following an 11.8 percent rise in June.

New loans in China surged to a record in the first half of the year due to government spending, but this new credit is yielding lower growth as the country grapples with overcapacity and systemic inefficiencies.

Fears surrounding debt accumulation and excess cash on corporate balance sheets have led to speculation that further monetary easing will be limited. The focus for the remainder of the year is expected to shift toward structural reforms and fiscal measures aimed at promoting growth.

Growth rates for industrial output and retail sales are predicted to have moderated slightly in July, while urban fixed asset investment could expand by 8.8 percent during January to July, reaching a 16-year low and slowing from 9.0 percent in the first half of the year.

Economists are again likely to scrutinize private investment growth, which has dwindled to record lows, further complicating the economic landscape.

Foreign exchange reserves are expected to have decreased to $3.20 trillion following an unexpected rise in June spurred by a stronger yen. Nonetheless, China’s reserves have shown stability in recent months even amid new downward pressures on the yuan, suggesting the government has effectively mitigated capital outflows.

Data concerning foreign exchange reserves is anticipated to be released this weekend, with trade, inflation, and loan statistics due next week. Additional reports on industrial output, investment, and retail sales are scheduled for August 11.