Editor's Note: Below are the key takeaways from today's Early Look written by Senior Macro analyst Darius Dale about the emerging slowdown in China. In it, Dale recounts the slowing in 11 economic indicators of "Old China," 8 of the industrial economy, 2 of the consumer economy, and 3 inflation measures.
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Right on queue with the advent of our #ChinaSlowing Q3 Macro Theme, economic growth on the Chinese mainland decelerated across pretty much every key category of high-frequency data in July.
- Chinese property prices continue to disinflate. Average House Prices – Tier 1 Cities: 8.4% YoY vs. 10.0% in JUN
- Amid the real slowing, the PBoC pumped a net +470B yuan into the mainland financial sector last month.
- All told, even though it’s safe to reiterate our #ChinaSlowing theme, I don’t think it makes a ton of sense to be short of the Chinese equity market.
Bottom Line: The closed capital account limits investment opportunities to domestic stocks, domestic bonds (barely; the overwhelming majority of bonds rest on state bank balance sheets), domestic bank accounts, domestic real estate and gold. As such, it’s no surprise to see inverse correlation between China’s property market and the A-Shares firming in recent years as more Chinese graduate into the middle class and have capital to invest.