Standard Chartered economists Hunter Chan and Shuang Ding have analyzed China's economic data for July and August, concluding that domestic demand has weakened while production activity has remained resilient, supported in part by strong external demand and the AI supercycle [1]. The economists observed softer household consumption and ongoing contractions in both manufacturing and real estate investment, contrasting with stronger industrial production figures [1].
The bank estimates that monthly GDP growth improved in August, primarily due to robust industrial production growth. However, they note that this growth remains below the lower end of China's annual growth target range of 4.5%-5.0% [1]. Standard Chartered sees downside risk to its Q3 GDP growth forecast of 4.6% year-on-year, citing the persistent weakness in domestic demand [1].
In response to these challenges, the economists expect the Chinese government to accelerate budget implementation, including faster spending and the deployment of bond proceeds, to help stabilize infrastructure investment [1]. They also anticipate that supportive monetary policy will continue, ensuring ample liquidity in the financial system [1].
CONCLUSION
Standard Chartered's analysis points to rising growth risks for China due to weakening domestic demand, despite some resilience in industrial production. The bank expects government and monetary policy support to continue, but sees downside risk to near-term GDP growth targets.