China | The economy maintains recovery momentum in July but still unbalanced

Summary

Economic activity indicators of July including industrial production, fixed asset investment and retail sales all pointed that growth recovery extended in the second half of the year. However, the demand side still lagged behind the supply side.

Key points

• Key points:
• Economic activity indicators of July maintained recovery momentum, indicating the post-COVID recovery extended in 2H.
• The unbalanced recovery, that demand side lagged behind the supply side also exists in July, but it improves from the 1H.
• The better-than-expected recovery makes the PBoC plan to gradually normalize monetary policy in 2H, however, the monetary policy normalization does not necessarily mean the tightening cycle starts.
• Growth uncertainties including the further possible rounds of COVID-19 and escalating China-US relationship still call for fiscal and monetary policy support in 2H.

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