China's Economic Watch: Inflation, Trade, and Geopolitical Developments
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Several key data and events to watch for this week. On the geopolitical front, US Treasury Yellen has kick-started her official visit to China and will be meeting top Chinese officials over the weekend, 8 July to 9 July. Market participants will be watching for signs of whether there will be progress made between the US and China in finding areas of common economic ground and opening communication channels for further dialogue amid a still frosty relationship between them over the current “tech war”.
On Monday, inflation and producers’ prices data for June will be out and the consensus is set for a continuation of lackluster readings. Consumer inflation is expected to come in at 0.2% year-on-year, unchanged from 0.2% in April, a 26-month low. On the other hand, producers’ prices are expected to slip further to -5% year-on-year from -4.6% in May. If it turns out as expected, it will be the ninth consecutive month of contraction which increases the risk of a deflationary spiral in China.
On Tuesday, outstanding loan growth together with M2 money supply data will be released. Loan growth is expected to inch slightly lower to 11.2% year-on-year in June from 11.4% in May; its weakest pace of increase since January 2023.
On Thursday, the balance of trade for June will be out to gauge the latest conditions in external and internal demand. Exports growth is forecasted to shrink at a lesser magnitude of -3.1% year-on-year from -7.5% in May, a three-month low. Imports growth is forecasted to decline at a lesser rate of -2 % year-on-year from -4.5% in May. If it turns out as forecasted, it will be the fourth consecutive month of falling purchases, signaling the continuation of a weak domestic demand environment.
