Key Takeaways
- China's July economic data signals a broad slowdown, with retail sales growing 3.7%, industrial production 5.7%, and fixed asset investment 1.6%, all missing estimates and indicating deceleration, while property investment plunged 12.0% year-to-date.
- Unemployment in China rose to 5.2% in July, partly due to the college graduation season, prompting the National Bureau of Statistics to call for greater efforts to stabilize the economy.
- U.S. President Donald Trump has pledged support for detained Hong Kong activist Jimmy Lai, stating he would raise the issue during ongoing trade and tariff negotiations with China.
- Japanese officials report that Russian forces obtained prohibited machine tools via firms based in China, highlighting concerns over sanctions evasion and the flow of critical manufacturing equipment.
- Federal Reserve Chair Jerome Powell is scheduled to speak on August 22 at the Jackson Hole Economic Symposium, with markets closely anticipating signals on the economic outlook and the Fed's policy framework amidst speculation of potential rate cuts.
China's Economy Faces Headwinds in July
China's economic recovery showed signs of faltering in July, with key indicators missing market expectations. Retail sales grew by 3.7% year-on-year, below the estimated 4.6% and down from June's 4.8%. Industrial production also slowed, increasing by 5.7% year-on-year, less than the anticipated 6.0% and a decrease from the previous month's 6.8%. Fixed asset investment, excluding rural households, rose by a mere 1.6% year-to-date through July, significantly missing the 2.7% estimate.
The property sector continues to be a drag on the economy. Property investment for the year-to-date through July declined by a substantial 12.0% year-on-year, worsening from the 11.2% drop recorded in the first half of the year. Residential property sales year-to-date also fell by 6.2%. The National Bureau of Statistics noted that high temperatures and floods caused a temporary hit to China’s July growth, and acknowledged that more effort is needed to shore up the economic recovery. Efforts are also being stepped up to stabilize foreign trade.
The surveyed jobless rate in China increased to 5.2% in July from 5.0% in June, with officials attributing part of this rise to the college graduation season. This uptick in unemployment adds to the pressure on policymakers to implement further stimulus measures to boost domestic demand and confidence.
Geopolitical Developments and International Relations
In a significant geopolitical development, U.S. President Donald Trump has publicly vowed to support Hong Kong media tycoon and pro-democracy activist Jimmy Lai, who is currently detained. Trump stated he would "do everything I can to save him" and indicated he would raise Lai's case as part of negotiations with China over trade and tariffs. Lai, 77, has been held in solitary confinement for over 1,500 days since December 2020 and faces charges under Hong Kong's national security law. Beijing has strongly opposed external interference in the case, viewing Lai as an orchestrator of "anti-China, destabilizing activities."
Meanwhile, Japan has reported that Russian forces have obtained prohibited machine tools through firms based in China. This comes as part of broader efforts by Russia to circumvent Western sanctions, with Japanese authorities investigating the disappearance of over 300 precision machine tools from Japan's Tsugami Corp. that were sold to Chinese companies. Approximately 30 of these units have reportedly been traced to Russian territory, used for manufacturing weapons components.
In India, Prime Minister Narendra Modi emphasized that the concept of self-reliance, or "Atmanirbhar Bharat," extends beyond mere trade. Modi highlighted India's focus on enhancing its own capabilities across various sectors, including technology and defense production, to achieve comprehensive self-sufficiency.
Central Bank Watch: Powell and BOJ
Federal Reserve Chair Jerome Powell is scheduled to deliver a highly anticipated speech on the economic outlook and the Fed's policy framework assessment at the Jackson Hole Economic Symposium on August 22. Markets are keenly watching for any signals regarding the future trajectory of U.S. monetary policy, particularly amid speculation of potential rate cuts as inflation is impacted by tariffs and the job market shows signs of cooling.
In Japan, Finance Minister Katsunobu Kato reiterated that monetary policy decisions fall under the exclusive jurisdiction of the Bank of Japan (BOJ). Kato stated that he expects the BOJ to conduct appropriate monetary policy to sustainably and stably achieve its 2% price target, in cooperation with the government.
On the Korean Peninsula, South Korean President Lee Jae-myung expressed hopes for renewed inter-Korean talks after Pyongyang reportedly began dismantling propaganda loudspeakers along the border, a reciprocal measure to Seoul's earlier initiatives. However, North Korean leader Kim Jong Un's sister, Kim Yo Jong, dismissed Seoul's outreach efforts, stating that North Korea has "no interest" in dialogue with South Korea. President Lee affirmed that South Korea has no plans for hostile actions, continuing efforts to restore trust and dialogue.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.