context: Q2 economic data was released alongside worrying June CPI and PPI data. Expect stimulus to primarily come from fiscal policy, while monetary policy makers continue managing de-leveraging, inflation, and market volatility.

National Bureau of Statistics (NBS) released Q2 economic data 15 July 2019, showing Q2 GDP growth of 6.2 percent, down from 6.4 percent in Q1, bringing H1 GDP growth to 6.3 percent. This falls within the 6-6.5 percent target, according to Mao Shenyong 毛盛勇 NBS spokesman. More detailed H1 data indicate

  • real per capita disposable income rose 6.5 percent
  • investment growth
    • fixed asset investment increased 5.8 percent y-o-y
    • real estate development increased 10.9 percent y-o-y
    • infrastructure increased 4.1 percent y-o-y
  • consumption contributed 60.1 percent of GDP growth, down 5 percentage points from Q1

Revival of infrastructure investment and further consumption stimulus are expected to drive economic growth in H2. Li Chao 李超 Huatai Securities chief macroeconomic researcher and Lian Ping 连平 Bank of Communications chief economist believe relaxation of local special bond policies, like the ‘Notice on stepping up local government bond issuance to support key areas and major projects’, which allows major projects to use special bonds as investment principal, will promote infrastructure investment. Li also points out that the National Development and Reform Commission has increased project approval in H1.

Bank of Communications Financial Research Centre predicts total retail sales of consumer goods in China will grow 8.5 percent in 2019, and consumer spending’s contribution to economic growth will exceed 75 percent. According to the bank and Jiang Chao 姜超 Haitong Securities chief economist, reductions in personal tax income tax and government policies to promote automobile, household appliance, elderly and child care consumption will support growth.