Crude oil imports show initial recovery, but China’s growth repair still needs faster fiscal spending

Overview

The report uses high-frequency data such as port shipping, factory operating rates, auto sales, bond issuance, liquidity operations, housing transactions, and commodity prices to track changes in China’s trade, production, policy, real estate, and inflation in July. The data are mixed: export volumes and crude oil imports improved at the margin, housing transactions turned to year-over-year growth, and fiscal and monetary operations continued to provide support; however, container shipping, auto sales, steel production, and the land market remained weak, and July PMI also indicated that the starting point for the third quarter was below expectations.

Core views

JPMorgan maintains its directional view of growth recovery in the second half, but emphasizes that the recovery depends on stronger fiscal support and export resilience. Port operations in July largely recovered after disruptions from extreme weather, with bulk shipping driving the export-tracking indicators higher and tanker-arrival declines narrowing notably; meanwhile, container shipping and shipping to the United States declined, and auto consumption continued to weigh on domestic demand. The recent focus of fiscal policy is expected to be accelerating spending of existing funds, with incremental stimulus dependent on data. Monetary policy maintains a moderately accommodative stance, but the timing of a rate cut has been postponed to the fourth quarter. The improvement in housing transactions is positive, but the magnitude is limited, and prices, land sales, and the sustainability of the improvement still need to be monitored.

Analysis framework

The report maps port vessel deadweight tonnage, freight rates, tanker arrivals, industry operating rates, auto retail sales, government bond issuance, central bank instrument balances, urban housing transactions, and high-frequency commodity prices to monthly official indicators such as exports, industrial production, retail sales, fiscal policy, monetary policy, real estate, and inflation, and compares them with the previous month and the same period last year.

Methodology notes

• Macro TrackingHigh-frequency Alternative Data Mapping

  Using high-frequency proxy indicators to anticipate monthly official economic activity

  The report uses daily or weekly data such as vessel deadweight tonnage, industry operating rates, sales, and prices to assess marginal changes in exports, industrial production, consumption, and inflation.

• Policy AnalysisFiscal Issuance and Spending Progress Tracking

  Assessing fiscal support by combining bond issuance scale and annual target completion rates

  In addition to comparing monthly issuance, the report also compares progress with the same period last year to assess fiscal funding supply and room for subsequent acceleration in spending.

• Monetary Policy AnalysisLiquidity Instrument Tracking

  Observing liquidity injections through the MLF, open market operations, and reverse repos

  The report combines net injections from central bank instruments and policy communication to assess the degree of easing, while distinguishing between the signaling role of rate cuts and their actual stimulus effect.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China government bonds and interest rates

  Increased fiscal supply and monetary easing expectations jointly affect yields.

  Strengths

  The central bank maintains a moderately accommodative stance and injects liquidity through various tools.

  Weaknesses

  Continued government bond issuance creates supply pressure, and the actual stimulus effect of a 10-basis-point rate cut may be limited.

  Comparison

  The rate-cut forecast has been postponed from the third quarter to the fourth quarter, implying a weaker easing pace than previously expected.

  Risks

  If growth weakens further, easing expectations may heat up again; if fiscal spending accelerates notably, bond supply and growth expectations may push up yield volatility.

• Crude oil and China’s energy value chain

  Tanker arrivals and refining-related operating rates reflect crude oil imports and processing activity.

  Strengths

  The decline in tanker arrivals in July narrowed sharply from June, and asphalt plant operating rates have recovered since mid-June.

  Weaknesses

  Tanker arrivals are still down year over year, and related operating rates are also below levels before the Middle East conflict.

  Comparison

  Tanker arrivals in July fell by about 5% year over year, significantly better than the decline of more than 35% in June.

  Risks

  Geopolitical conflicts, oil price volatility, low-base effects, and insufficient domestic refining demand may affect the sustainability of the recovery.

• China exports and shipping chain

  Port vessel deadweight tonnage and freight rates are used to assess export volumes and shipping demand.

  Strengths

  After the impact of extreme weather faded, port operations largely recovered, and departing bulk carrier deadweight tonnage rose 26.9% year over year.

  Weaknesses

  Container shipping, shipping to the United States, and freight rates on major routes all declined.

  Comparison

  Growth in total departing deadweight tonnage rose from 17.2% in June to 21.3% in July, but structurally it was driven by bulk shipping rather than containers.

  Risks

  External demand, trade policy, extreme weather, and route structure changes may cause aggregate indicators to overstate export resilience.

• China auto and new energy vehicle value chain

  Passenger car retail sales and tire factory operating rates reflect auto consumption and production.

  Strengths

  New energy vehicle sales fell only 2%, outperforming the overall passenger car market.

  Weaknesses

  Passenger car retail sales fell 18% year over year from July 1 to 26, and the decline in auto production may widen.

  Comparison

  New energy vehicles are more resilient than traditional passenger cars, but overall auto sales still drag on retail sales.

  Risks

  Reduced subsidies, shrinking tax incentives, rising fuel costs, and demand pull-forward may continue to suppress sales.

• China real estate chain

  Housing transactions, listing prices, and land sales reflect real estate demand and local fiscal conditions.

  Strengths

  Both new home and existing home transactions achieved year-over-year growth, and sales managers’ confidence improved.

  Weaknesses

  The magnitude of transaction improvement was limited, existing home listing prices continued to fall, and land sales revenue remained far below the same period last year.

  Comparison

  New home transactions in 30 cities turned from a 6.9% year-over-year decline in June to 1.5% growth in July, while existing home transaction growth slowed from 12.3% to 4.6%.

  Risks

  The transaction recovery may not be sustained, while falling prices and weak land transfer revenue will continue to constrain developers’ and local governments’ balance sheets.

• Industrial metals and steel

  Operating rates and prices reflect industrial production and raw material demand.

  Strengths

  Copper prices remain elevated with support from artificial-intelligence-related demand, and aluminum prices have rebounded.

  Weaknesses

  Value-added output in the steel industry may turn negative, while rebar and cement prices remain low.

  Comparison

  Copper and aluminum are performing better than steel and building materials, showing divergence in demand structure.

  Risks

  Weak real estate, overcapacity, and external-demand volatility may continue to pressure steel and building material prices.

Key data

• Departing vessel deadweight tonnage in JulyUp 21.3% year over yearExcluding tankers, higher than 17.2% in June, mainly driven by the recovery in bulk shipping.
• Tanker arrivals in JulyDown about 5% year over yearThe decline narrowed notably from more than 35% in June, partly affected by a low base.
• Departing container ship deadweight tonnage in JulyDown 5.6% year over yearDown 9.6% month over month, reflecting a notable weakening in container shipping.
• Shipping to the United States in JulyDown 3.5% year over yearDown 9.9% month over month on a non-seasonally adjusted basis.
• Passenger car retail sales from July 1 to 26Down 18% year over yearAffected by lower per-vehicle replacement subsidies and purchase tax reductions, as well as rising fuel costs.
• New energy vehicle sales during the same periodDown 2% year over yearThe decline was significantly smaller than that of the overall passenger car market.
• Government bond issuance in JulyRMB1.154 trillionRoughly in line with RMB1.138 trillion in June.
• Annual issuance progress of central government bonds49.8%Lower than 57.4% in the same period last year.
• Annual issuance progress of special local government bonds54.7%Still lagging the progress in the same period last year.
• Net injections through major central bank toolsMLF net injection of RMB100 billion, outright open market operations net injection of RMB700 billion, pledged open market operations net withdrawal of RMB250 billionMore than RMB2 trillion of overnight reverse repos were also conducted from late July to early August.
• New home transactions in 30 major cities in JulyUp 1.5% year over yearJune recorded a year-over-year decline of 6.9%.
• Existing home transactions in major cities in JulyUp 4.6% year over yearGrowth was lower than 12.3% in June.
• Agricultural food prices in JulyDown 1.0% year over yearAmple summer supply increased the drag on the overall consumer price index.
• Wholesale pork prices in JulyUp 7.3% month over month and down 24.0% year over yearThe year-over-year decline narrowed from 28.3% in June.

Impact & implications

Divergence in macro data means near-term growth and earnings recovery may lack a broad base. Improvements in export volumes, crude oil imports, and housing transactions help stabilize growth expectations, but the contribution of bulk shipping to export indicators is large, while weakening container and U.S.-bound shipping undermines the quality of external-demand improvement. The pace of spending after fiscal issuance will be the key to whether growth can materialize in the second half, while the postponement of rate cuts means the marginal boost from monetary policy to real demand may be limited. Rebounding energy and petrochemical prices may raise some production costs, but falling agricultural prices continue to suppress overall inflation.

Risks

• July PMI was weaker than expected, indicating that the starting point for third-quarter economic growth was below prior expectations.
• Insufficient actual spending after fiscal fund issuance could cause the growth recovery in the second half to fall short.
• Export improvement is mainly driven by bulk shipping, while container and U.S.-bound shipping have weakened, meaning external-demand resilience may be overestimated.
• Auto sales and some industrial operating rates remain weak, and recovery in domestic demand and manufacturing may be slower than expected.
• The improvement in real estate transactions is limited, and price declines and deteriorating land revenue may persist.
• Tensions between the United States and Iran and rising energy prices may increase corporate costs and inflation volatility.
• Falling agricultural prices and deeply negative year-over-year pork price growth may continue to weigh on overall inflation.
• There may be differences in definitions, seasonality, and base effects between high-frequency proxy indicators and final official data.

What to watch

• Whether fiscal authorities can accelerate actual spending of funds raised through issued government bonds.
• Whether subsequent PMI, industrial value-added, and retail sales data confirm growth recovery in the second half.
• Whether container shipping, U.S.-bound shipping, and freight rates on major routes can stabilize.
• Whether the improvement in tanker arrivals and asphalt plant operating rates can be sustained.
• Whether a 10-basis-point rate cut is implemented in the fourth quarter and its actual impact on financing demand.
• Whether growth in new and existing home transactions can continue, and whether listing prices and land sales stop falling.
• The impact of auto replacement subsidies, purchase tax incentives, and changes in fuel costs on passenger car demand.
• The transmission of energy, petrochemical, agricultural product, and pork prices to the consumer price index and producer price index.