- As widely expected, China’s Q2 GDP slowed to 6.2% yoy, after 6.4% yoy in Q1. This marked the weakest level in 27 years.
- By contrast, monthly real activity data like industrial production (IP), urban investments and retail sales surprised on the upside.
- Given the weak signals from recent PMIs, we are cautious that monthly data already signal a turn-around. That said, monetary as well as fiscal policy measures are markedly supporting the economy.
- Overall, in the light of the bumpy re-opening of the US-China trade talks and a lifting of tariffs not in sight, we still see the Chinese economy to tend to soften in Q3 before possibly stabilizing in Q4. In case of a stronger slowdown, the government would not hesitate to resort to more policy support.
- Stock markets in China responded slightly positively overall, turning around from a soft start.
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