Summary: In August, the implementation of existing policies accelerated, the effect of stabilizing growth gradually emerged, and the overall economic operation remained stable. Industrial production expanded at an accelerated pace, and the decline in infrastructure investment narrowed during the month. However, consumption, manufacturing investment, and real estate investment still need further stimulation.
Under the resonance of multiple factors, industrial production accelerated its expansion. In August, the year-on-year growth rate of industrial production was 5.2%, higher than the previous 4.5%. There are three main reasons for this. First, the interference from high temperature and heavy rainfall weather subsided. Second, exports grew by 25% year-on-year, effectively supporting industrial production. Third, the accelerated implementation of existing policies such as the "six networks" drove the expansion of related manufacturing production. Among them, the high growth in exports is mainly due to two reasons. On one hand, the global manufacturing sector remains relatively prosperous. The global manufacturing PMI was 52.3%, maintaining above 50% for 13 consecutive months, and China’s exports to major economies maintained a high growth rate. On the other hand, demand in the AI industry chain is strong. Exports of high-tech products and electromechanical products related to the AI industry chain grew year-on-year by 56.9% and 32.8%, respectively. Within the year, the global credit impulse remains in an upward phase, and global manufacturing may maintain a high level of prosperity. Meanwhile, AI infrastructure is not yet complete, and capital expenditure is expected to continue expanding, so China’s exports may remain resilient. Coupled with the accelerated implementation of existing policies, we expect industrial production to remain basically stable.
The effect of existing policies became apparent, and the year-on-year decline in investment narrowed during the month. In August, cumulative fixed asset investment fell by 7.2% year-on-year, with the decline expanding by 0.5 percentage points, but the monthly year-on-year decline narrowed from 13% to 11%, mainly because the effect of existing policies became apparent. The year-on-year decline in infrastructure investment narrowed from 11.2% to 6.9% during the month. Due to the need to further stimulate domestic demand, low capacity utilization rates, and some industries strengthening "anti-involution," enterprises’ business expectations need improvement, leading to a pause in expansion investment. The cumulative year-on-year growth rate of manufacturing investment declined from -1.7% to -2.3%. Although the real estate market demand structure improved structurally, the cumulative year-on-year decline in total commodity housing sales area was 12.1%, with the decline expanding by 0.3 percentage points. Overall inventory pressure remains high, real estate companies still face capital pressure, and cumulative real estate investment fell by 19.9% year-on-year, with the decline expanding by 0.7 percentage points.
Consumer confidence needs to be boosted, and the recovery of consumption slowed. In August, the year-on-year growth rate of total retail sales of consumer goods fell from 0.6% to 0.4%, and the seasonally adjusted month-on-month growth rate was -0.13%, both at low levels. The slowdown in consumption recovery has two reasons. On one hand, residents’ consumption confidence needs to be boosted. The urban surveyed unemployment rate rose from 5.2% to 5.3%, and both the consumer employment confidence index and income confidence index remained at low levels. On the other hand, the subsidy increase for trade-in programs in 2026 declined, especially the reduction in automobile consumption subsidies, combined with a high base formed by last year’s trade-in programs, dragged down the year-on-year growth of trade-in related consumption. Automobile consumption fell by 18.5% year-on-year. Affected by the sluggish real estate market and high base effects, consumption of building and decoration materials fell by 11.8% year-on-year, and furniture consumption fell by 7.9% year-on-year.
Risk warnings: The effect of existing policies needs to be strengthened; the difficulty of halting the decline and stabilizing the real estate market may exceed expectations; credit creation needs further enhancement; the endogenous momentum for price improvement remains insufficient; global trade frictions intensify, overseas demand shows a turning point, and export growth slows; the Federal Reserve raises interest rates more times than expected.