Barclays: China: Demand Lags Supply
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Key Views
Fixed-asset investment fell 5.7% year-on-year in the first half, with manufacturing, infrastructure, and property all contracting simultaneously. The property sector deteriorated further: June investment dropped 24.4%, new home sales fell 14.3%, and new starts declined 26%. Retail sales growth was anemic at just 1% in June. Conversely, industrial production strengthened to 5.3% year-on-year, with high-tech manufacturing output growing 14%.
Outlook
Barclays expects exports—up 27% year-on-year in June—to remain a critical buffer, forecasting double-digit growth in the second half driven by the global AI capex cycle and the energy transition. The undeployed CNY 800 billion in new financing tools and potential additional quasi-fiscal stimulus represent the primary policy levers for achieving annual growth targets. The late-July and late-October Politburo meetings are key windows for observing potential policy escalation. If 2026 growth risks falling below the 4.5%–5% target range, policymakers may accelerate infrastructure projects.
Recommended Securities
No specific securities were recommended.
Key exhibits
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