【Economic Perspectives】China Economy in Aug – Healthy recovery with favorable trends

China’s economy in Aug recorded healthy and robust recovery. Most economic indicators, whether related to industrial output, FAI or retail sales, are progressing favorably. Besides, there also emerged new positive trends in Aug, highlighted by 1) retail sales growth turning positive; 2) global economy rebound lending support to growth of exports and export-oriented industries; 3) job markets becoming tighter for both manufacturing and service sectors.


  • Acceleration of industrial output growth, expanding 5.6% YoY in Aug. Sector wise, Mining/manufacturing/electricity and heat supply was up 1.6%/6.0%/5.8%. The acceleration of manufacturing output was believed to be broad-based. In addition to high-tech industries, which continued to outpace manufacturing average by growing +7.6% YoY in Aug, the majority of other traditional industries also reported accelerating growth or narrowing decline in Jan-Aug 2020 compared to 1H20.


  • FAI nudged up gradually, narrowing decline to 0.3% in Jan-Aug from 1.6% in Jan-Jul. Manufacturing FAI declined 8.1% YoY, up 2.1ppt MoM, boosted mainly by high-tech industries. Infrastructure FAI narrowed decline by 0.7ppt to 0.3% YoY, but monthly investment decelerated in Aug possibly dragged by flood and rain season. Real estate investment speeded up to grow 4.6% YoY, expanding 1.2ppt MoM. Both construction and land acquisition expenditures are expected to maintain strong momentum. Investment related to e-commerce, R&D conversion, public health and education also increased significantly thanks to emerging demand since the outbreak of COVID-19.


  • Retail sales turned positive for the first time since Feb, up 0.5% YoY in Aug, thanks to rising demand during the summer vacation, gradual recovery of domestic economy, and strong car sales (+11.8% YoY in Aug). Excluding car sales, however, retail sales growth still dived in the negative territory. Catering rebounded significantly, narrowing its decline to 3.5% YoY in Aug from 8.2% in Jul for the above-designated-size sample. Divergence still exists between larger retailers and smaller ones, which necessitates sustained support for small retailers and also indicates opportunities for industry consolidation.


  • Noteworthy trends. 1) Tightening of employment situations; 2) Global economic recovery lifted China’s export, +9.5% YoY in Aug, and bodes well for revenue and employment of export-oriented industries; 3) Normalization of policy boost and speedier execution, which places more emphasis on structural improvement to facilitate both domestic and international circulation and to steer the economy through future cycles.


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