Bull vs. Bear： Is Bad Data Good News Again？

Investment Rating - The report indicates a moderate investment rating for the Chinese economy, with expectations of a slight growth improvement in the second half of FY24, tracking GDP growth at 4.6-4.7% [2][4]. Core Insights - The Politburo meeting highlighted the urgency for more easing measures in response to the growth deceleration, with a pledge to reach the FY2024 growth target of 5% [4][25]. - There are mixed perspectives on China's economic outlook, with bullish arguments focusing on potential support for consumption and resilient exports, while bearish arguments emphasize ongoing downward growth momentum and weak domestic demand [2][7]. Summary by Sections Policy Easing - The report emphasizes the need for faster implementation of announced policies and preparation for incremental stimulus measures [5]. - The focus of policy easing is shifting towards household consumption, particularly in services, to promote urbanization and unlock consumption potential [5]. Consumption - The Politburo has called for more support for consumption, indicating a shift in policy focus [5]. - The report suggests that the effectiveness of these measures will depend on the implementation of predetermined policies [4]. Property Market - The impact of the "517 Housing Stimulus" has largely faded, with home sales returning to early May levels and a noted decline in prices [25]. - The report indicates that price adjustments alone may not stabilize the housing market, as they could lead to weaker consumer sentiment and higher risks of mortgage delinquency [25]. Industrial Capacity and Inventory - There is a noted involuntary buildup of industrial inventory due to weak domestic demand, which could negatively impact industrial production [13]. - The report highlights that the YoY growth of inventory has accelerated, indicating passive restocking amid insufficient demand [13]. Tax Revenue - Both corporate and personal income tax revenues contracted YoY in 2Q, reflecting a divergence between real GDP growth and sluggish sentiment [20]. - The decline in tax revenue is constraining government spending capabilities, potentially leading to a deflationary loop in the economy [20]. Construction Activity - Demand for rebar and cement remains at multi-year lows, reflecting ongoing deleveraging in local government financing vehicles and the housing sector [29]. - Infrastructure investment growth is primarily driven by electricity production, while local government construction activity has decreased [29].