China Center Data Flash: August data confirms Q3 weakness

Data Flash is a brief interpretive summary of China’s official monthly economic data release.

Economic data for August released last week was just plain bad — there’s no other way to put it. Growth momentum is undoubtedly on a downward trend in Q3, and the weaknesses were across the board. Even export growth, the seemingly bright spot from July’s data, grew more slowly in August. Real estate still seems like the primary culprit driving the industrial slowdown, with sales and starts both lackluster for the month. But weak credit growth is also holding back economic expansion — Total Social Financing (TSF) in the month grew at the slowest pace since May 2005. But despite the poor performance of the economy in September, the leadership has yet to respond with stepped up stimulus. 

A slowing economic growth rate throughout the second half of 2014 is likely to lead to continued regulatory predation and a sustained difficult compliance environment, particularly as it hampers local-champion businesses and eats into the city fiscal revenues derived therefrom.