On the surface, China’s Q2 macroeconomic data revealed remarkably few changes in the economy from earlier this year, with GDP growth unchanged at 6.7% y/y. Warranting a closer look, in our view, are the outsized contributions of financial services and real estate to China’s economic output, as well as the decelerating credit impulse provided by China’s banks, which suggests weaker activity growth ahead in the second half. We also evaluate some surprising data releases, including China’s $13.4 billion increase in its foreign exchange reserves in June despite market pressure for the currency to depreciate, as well as the sharp divergence of state-led and private sector investment trends in 2016.
