Chinese Q2 GDP rose 6.7% year-on-year, in line with market expectations. Seasonally adjusted quarter-on-quarter growth remains comfortable at 1.80%. However, the economy is showing some weakness: June fixed asset investment (6%; prior: 6.10%), industrial production (6%; prior: 6.80%) and retail sales (9%; prior: 8.50% but below 2-year average of 10.20%).
Money supply is tightening, due to caution of financiers and debt risk, so the Chinese economy is expected to slowdown industrial activity and private consumption. Trade tariffs will be a key factor in coming months. Further CNY weakness is expected: now at 6.6845, USD/CNY is approaching the 6.675 in the short-term.
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By Vincent Mivelaz