context: Downward pressure still haunts the Chinese economy, despite a slight Jun 2019 revival. With constrained policy space and high debt levels, state efforts to find new areas for expansion have achieved minimal results. Stabilisation policies prevent the economy from further deteriorating.

Liu Aihua 刘爱华 National Bureau of Statistics spokesperson attributes the Jul 2019 deceleration of manufacturing, consumption, services and investment growth to seasonal factors, insisting the overall economy is stable. July retail consumption growth was 7.6 percent, down by 2.2 percentage points m-o-m, Liu added.

The automobile consumption slowdown drags down other consumption data — its growth dropped from 17.2 percent in June to -2.6 in July. During June’s transition period for emission standards, automobile dealers launched promotions and advanced July demand, says Liu. July’s consumption growth rate subtracting automobiles was 8.8 percent, basically the same as the previous month.

E-commerce promotions in June also advanced July demand, notes Ming Ming 明明 CITIC Securities analyst, as the categories with slow growth had experienced fast growth in previous months.

The same is true for industrial production. July above-scale industry added value grew by 4.8 percent y-o-y, 1.5 percentage points lower than last month. June’s short-term rebound was unsustainable and therefore the growth drop is to be expected, says Liu Xuezhi 刘学智 Bank of Communications senior researcher. Ming does not see a tremendous downward risk and expects recovery in August and September.

Employment remains stable, but structural conflict still exists. January-July urban new jobs were 8.67 million, 79 percent of the annual target. The unemployment rate rose by 0.2 percentage point in July to 5.3 percent, but due to college graduates entering the job market after graduation season. Exporters are hiring conservatively, with weak global demand and domestic industrial upgrades requiring structural adjustments, but employment stabilisation will continue, says Liu Xuezhi.

The H2 2019 economy will still count on infrastructure investment, says Yang Yewei 杨业伟 Southwest Securities chief analyst, because exports will remain weak and consumption cannot be significantly promoted in such a short time. Government controls and low profitability constrain real estate and manufacturing investment respectively, while infrastructure is a major stabiliser, adds Yang. New Times Securities expects quick releases of more consumption and domestic demand stimulating policies. Guotai Junan Securities anticipates one more targeted reserve ratio lowering for small and medium banks, but says a general reduction is unlikely.