JLL Comments on China national economic operation data in the first half of 2022

Data shows activity levels have been bouncing back as the latest COVID-19 wave is receding and mobility restrictions are gradually lifting. Total social retail sales in June has delivered a positive YoY growth of 3.1%, beating consensus of -0.5% YoY.

China’s economy is no doubt bottoming. But it is still in the midst of its recovery may not be out of the woods yet. 

One of the major concerns is whether China will see a V-shaped recovery or a W-shaped one, given the persistent job market pressure, the still-sluggish domestic consumption as well as external uncertainties. 

We expect the current easing stance supportive for growth to remain and pro-active fiscal policy continue to play a key role, leading to a more moderate recovery path in 2H2022.

Besides traditional infrastructure projects such as transportation, we notice China ramps up new infrastructure projects as part of its long-term goal to foster new growth drivers. We believe there is a possibility that policymakers may front-load some of next year’s infrastructure investment quota as they utilized this year’s quota in June.

The transmission from upstream to downstream prices and from factory gate prices to CPI are likely to continue, but still at a mild pace. This will give the PBoC more flexibility to stick to it s accommodative monetary policy in supporting the real economy and may focus on boosting credit rather than introducing any large-scale interest rate cuts.

The possibility of interest rate cuts or RRR cuts in China in the near term is not high, given the recent strong rebound in bank lending and credit expansion with the help of a series of policy supports from May.