China: Fiscal support to offset weak demand – Standard Chartered

Standard Chartered economists Hunter Chan and Shuang Ding have noted that China's July real activity data revealed a slowdown in momentum, with estimated monthly GDP growth falling below 4.3% year-on-year. They highlighted a disparity between robust supply and sluggish domestic demand, alongside relatively strong external demand.

Chan and Ding anticipate that fiscal policy will take the forefront in the second half of the year, with faster budget implementation and persistent accommodative monetary policy. In fact, the July Politburo meeting confirmed the expectation of continued policy support in the latter half of the year, focusing on existing measures.

In their view, fiscal spending will accelerate from the decline observed in the first half of the year, driven by faster budget implementation and bolstering investment. Monetary policy will likely continue to maintain ample liquidity, with Standard Chartered maintaining its call for a 25 basis points reserve requirement ratio (RRR) cut in the third quarter.