--- title: "China's domestic supply and demand remained weak in July, rebalancing may require stimulus policies." type: "Topics" locale: "zh-CN" url: "https://longbridge.com/zh-CN/topics/23285126.md" description: "On August 15, the National Bureau of Statistics released China's economic data for July. In July, China's total retail sales of consumer goods increased by 2.7% year-on-year, the value-added of industrial enterprises above designated size grew by 5.1% year-on-year, and the service industry production index rose by 4.8% year-on-year. From January to July, national real estate development investment reached 6.0877 trillion yuan, down 10.2% year-on-year, while national fixed asset investment (excluding rural households) totaled 28.7611 trillion yuan, up 3.6% year-on-year. Overall, market demand remained weak in July, and insufficient demand began to transmit to the supply side..." datetime: "2024-08-20T08:55:43.000Z" locales: - [en](https://longbridge.com/en/topics/23285126.md) - [zh-CN](https://longbridge.com/zh-CN/topics/23285126.md) - [zh-HK](https://longbridge.com/zh-HK/topics/23285126.md) author: "[满投财经](https://longbridge.com/zh-CN/profiles/3556353.md)" --- > 支持的语言: [English](https://longbridge.com/en/topics/23285126.md) | [繁體中文](https://longbridge.com/zh-HK/topics/23285126.md) # China's domestic supply and demand remained weak in July, rebalancing may require stimulus policies. On August 15, the National Bureau of Statistics released China's economic data for July. In July, China's total retail sales of consumer goods increased by 2.7% year-on-year, the value-added of industrial enterprises above designated size grew by 5.1% year-on-year, and the service industry production index rose by 4.8% year-on-year. From January to July, national real estate development investment reached 6.0877 trillion yuan, a year-on-year decrease of 10.2%, while national fixed asset investment (excluding rural households) totaled 28.7611 trillion yuan, up 3.6% year-on-year. Overall, market demand in July remained weak, and insufficient demand began to transmit to the supply side, leading to a slowdown in industrial growth. Currently, the Chinese economy is in the process of adjusting supply-demand balance, with declining capacity utilization and downward price pressures. To achieve rebalancing, policy stimulus may be essential. ### **01** ### **Weak Demand May Transmit to Supply Side; Counter-Cyclical Adjustments May Intensify** In the first half of 2024, China's industrial capacity utilization rate was 74.9%, slightly recovering from Q1 but still historically low. The reasons for the decline are complex: emerging industries face supply-side structural adjustments due to rapid capacity expansion (e.g., photovoltaic and lithium battery sectors), while traditional industries suffer from insufficient demand (e.g., real estate and related cement/building materials sectors). ![Image 1](https://pub.pbkrs.com/uploads/2024/f0f095dbfbc832d5a9aa9fdce38db52f?x-oss-process=style/lg) Since 2023, policymakers have prioritized addressing insufficient effective demand with industry-specific support measures. However, the results have been limited. On one hand, consumption stimulus policies remain conservative with room for expansion. On liquidity, the central bank has avoided "flood-like" easing, maintaining cautious monetary policies. June-July consumption data shows resilience in necessities: retail sales of food, beverages, and medicines maintained growth, while durable goods and property-related consumption weakened—gold/silver/jewelry (-10.4% YoY), audiovisual equipment (-2.4% YoY), and building materials (-2.1% YoY). ![Image 2](https://pub.pbkrs.com/uploads/2024/69988f5b9dd66df84250378847a3fc3f?x-oss-process=style/lg) Worryingly, weak consumption is transmitting to supply. July PPI fell 0.2% MoM and 0.8% YoY, driven by sluggish industrial demand depressing steel prices. Amid persistent real estate weakness, steel mills and cement plants proactively cut output—rebar production in July neared annual lows with further declines expected. If weak consumption persists, households may increase savings and reduce spending, triggering a vicious cycle of declining incomes and potential recession. Without endogenous momentum, government intervention is critical to prevent short-term issues from becoming entrenched. The July 30 Politburo meeting signaled more proactive counter-cyclical policies ("sustained and intensified efforts") to safeguard the ~5% GDP target. Further stimulus is likely in H2 2024. ### **02** ### **Risks and Necessity of Stimulus Policies** Market consensus agrees on China's demand contraction and growth pressures but diverges on stimulus efficacy. Critics warn of short-term gains versus long-term costs (e.g., inflation, debt), likening it to "drinking poison to quench thirst." This lack of consensus may explain the current piecemeal policy approach. Typically, when overcapacity meets insufficient demand, fiscal stimulus can mobilize idle purchasing power to reactivate idle assets and employment. However, this doesn't apply uniformly—some sectors (e.g., solar/Li-ion batteries) already suffer from oversupply, where stimulus risks pull inflation. Excessive demand beyond supply capacity could also trigger 恶性 inflation and trade imbalances, justifying cautious sector-specific interventions. ![Image 3](https://pub.pbkrs.com/uploads/2024/a7ee47062a6fb7d13b77181d08357484?x-oss-process=style/lg) The author argues that while no substitute for structural reforms, stimulus is necessary amid low inflation and trade surpluses. Though increasing government debt and money supply, these costs pale against protracted recession risks. In summary, China's economic restructuring naturally involves volatility. But unaddressed short-term pressures (e.g., property downturns) risk becoming entrenched. Stimulus—imperfect but actionable—holds reference value to stabilize growth foundations.