January-February activity data beat expectations, supported by fiscal front-loading. Property investment remained in a deep contraction; home prices declined further. Policy support should help contain the downside risk, in our view, with consumption being prioritised, Standard Chartered’s economists note.
Sustaining the momentum is key
“January-February activity data largely beat market expectations, except in property investment. Both new home and used home prices continued to decline compared with December, suggesting that the housing market has yet to find the bottom. On the other hand, strong infrastructure and manufacturing FAI data supported industrial demand, and the government’s commitment to support growth, especially consumption, coupled with seasonal holiday demand, helped retail sales.”
“Fiscal stimulus appears to have been front-loaded over 2M-2025. Aggregate total social financing (TSF) growth rose to 8.2% y/y in February on record-high government bond issuance. Fiscal spending appeared to be much higher than over the same period for the last five years; we think this should help correct budget under-implementation, which has weakened fiscal policy effectiveness in recent years. We maintain our GDP growth forecast for 2025 at 4.5%, and see upside risk to our estimate on better-than-expected macro data so far and a high likelihood of further stimulus being rolled out in the event of a significant economic downturn.”
“Meanwhile, we see challenges to China achieving its 5% growth target. Domestically, medium- and long-term loans to both households and corporates were lacklustre in 2M-2025, pointing to subdued housing purchases and private investment. CPI inflation dipped to -0.7% in February, still pointing to a supply-demand imbalance. Externally, export growth has slowed notably after the US tariff hikes, with bilateral tensions possibly building up even further.”
