Goldman Sachs weekly update on China's economic activity and policy high-frequency indicators

Overview

This is a weekly Goldman Sachs report tracking China's economic activity and policy, updating four categories of high-frequency indicators: consumption and travel, production and investment, other macro activity, and markets and policy. The report is published weekly to more closely monitor the impact of energy price supply shocks on China's economic activity.

Core views

The macro picture presented in the report is one in which improvement and pressure coexist: property sales, domestic flights, steel production, the rebound in port freight volumes, and the renminbi's exchange-rate performance provide some signs of improvement; however, declining consumer confidence, easing traffic congestion, official port container throughput still below the same period last year, and a decline in the latest oil demand reading suggest that end demand and foreign trade activity still warrant monitoring. On the policy side, policy announcements since mid-May have focused on stabilizing growth, consumption, investment, monetary policy, employment, and other structural issues.

Analysis framework

The report uses a high-frequency data dashboard approach, cross-checking marginal changes in economic activity and policy across dimensions such as property transactions, flights and cancellation rates, traffic congestion, energy and chemical prices, consumer confidence, steel and coal consumption, special bond issuance, EPMI, port throughput, rare earth magnetic material exports, oil demand, repo rates, the renminbi exchange rate, and policy announcements.

Methodology notes

• Macro high-frequency trackingFour-group high-frequency indicator framework

  Consumption and travel, production and investment, other macro activity, markets and policy

  The report organizes its observations around four groups of indicators, using weekly changes and year-over-year positioning to assess marginal changes in economic activity.

• Travel activity monitoringExplanation of traffic congestion index methodology change

  Methodology differences between Baidu Maps and Amap congestion data

  The report explains that beginning in 2022 the source of congestion data was switched from Amap to Baidu Maps; Baidu data begins in September 2021 and tracks similarly to Amap, but sample coverage differs, with Amap covering 100 cities and Baidu covering 98 cities.

• Commodity demand monitoringGS China oil demand nowcast

  High-frequency oil demand estimate

  The GS nowcast provides a high-frequency demand measure, while GS balances are based on supply-demand estimates updated every six weeks.

Asset mapping & comparison

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

• China real estate-related assets

  Primary and secondary home transaction volumes are high-frequency indicators for gauging conditions in the real estate chain.

  Strengths

  Transaction volumes have rebounded or remained above the same period last year, indicating improving marginal demand.

  Weaknesses

  The report does not provide information on prices, inventories, or developers' balance sheets, making it difficult to judge sustainability.

  Comparison

  Primary home sales are roughly at the level of the same period last year, while secondary home sales remain above the same period last year.

  Risks

  If consumer confidence and expectations for employment and income continue to weaken, the improvement in transactions may be difficult to sustain.

• China cyclical and industrial commodity-related assets

  Steel production, coal consumption, chemical prices, and oil demand reflect industrial activity and energy demand.

  Strengths

  Steel production increased, and coal consumption, though lower, remained above the same period last year.

  Weaknesses

  The oil demand nowcast fell to 16.4mb/d, while sulfuric acid and urea prices declined slightly.

  Comparison

  Some production-side indicators improved, but commodity demand and price performance were not fully synchronized.

  Risks

  Energy price shocks, insufficient demand, or changes in the policy pace may affect cyclical asset performance.

• China rates and money markets

  Interbank repo rates and overnight repo rates reflect short-end liquidity conditions.

  Strengths

  Repo rates edged lower, indicating a relatively accommodative short-term liquidity environment.

  Weaknesses

  The report does not provide details on the full term structure or the scale of central bank operations.

  Comparison

  At the Q2 Monetary Policy Committee meeting on July 8, the PBOC reiterated its moderately accommodative stance.

  Risks

  If policy rates, funding demand, or external exchange-rate pressures change, short-end rates may become volatile again.

• Renminbi exchange rate

  The renminbi's performance against the U.S. dollar and the CFETS basket reflects exchange-rate conditions and cross-border macro expectations.

  Strengths

  The renminbi appreciated slightly over the past week.

  Weaknesses

  The implied countercyclical factor in the USDCNY fixing remains range-bound, lacking a clear trend breakout.

  Comparison

  The renminbi appreciated slightly against both the U.S. dollar and the CFETS basket.

  Risks

  External U.S. dollar moves, trade data, capital flows, and policy expectations may affect the renminbi's direction.

Key data

• Daily primary home transaction volume in 30 citiesRebounded last week, roughly at the level of the same period last yearFrom the title of Exhibit 1.
• Daily secondary home transaction volume in 16 citiesRose slightly last week and remained above the same period last yearFrom the title of Exhibit 2.
• Domestic passenger flightsIncreased further last weekFrom the title of Exhibit 3.
• Passenger flight cancellation rateDeclined last weekFrom the title of Exhibit 4.
• Traffic congestionDeclined last weekFrom the title of Exhibit 5.
• Gasoline and diesel price adjustmentOn July 17, gasoline and diesel were raised by RMB 300 and RMB 290 per ton, respectivelyFrom the title of Exhibit 6.
• Sulfuric acid and urea pricesDeclined slightly last weekFrom the title of Exhibit 7.
• Morning Consult consumer confidenceDeclined over the past weekFrom the title of Exhibit 8.
• Steel productionIncreased over the past weekFrom the title of Exhibit 10.
• Daily coal consumption in coastal provincesDeclined last week but remained above the same period last yearFrom the title of Exhibit 11.
• Local government special bond issuanceRMB 2.36 trillion year to dateFrom the title of Exhibit 12.
• EPMISeasonally adjusted July reading rose slightlyFrom the title of Exhibit 13.
• Official port container throughputStill below the same period last yearFrom the title of Exhibit 14.
• Outbound vessel cargo volume at 20 major portsRebounded markedly after Typhoon BaviFrom the title of Exhibit 15.
• Rare earth magnetic material exportsJune export volumes to the EU rebounded, while export volumes to the U.S. and Japan were broadly flatFrom the title of Exhibit 16.
• China oil demand nowcastLatest reading edged down to 16.4mb/dFrom the title of Exhibit 17.
• Interbank repo rateEdged lower last weekFrom the title of Exhibit 18.
• Overnight repo rateEdged lower last weekFrom the title of Exhibit 19.
• Renminbi exchange rateAppreciated slightly against the U.S. dollar and the CFETS basket over the past weekFrom the title of Exhibit 20.
• Implied countercyclical factor in the USDCNY fixingTraded in a range over the past weekFrom the title of Exhibit 21.

Impact & implications

For investment research, this report is better suited as a high-frequency monitoring tool for marginal changes in China's macro activity rather than as a directional investment recommendation. The improvement in real estate and travel helps ease pessimism about domestic demand, but weakening consumer confidence, port throughput, and oil demand indicate that the recovery remains uneven; meanwhile, lower repo rates and a slight appreciation of the renminbi suggest that liquidity and the exchange-rate environment have been relatively stable in the near term.

Risks

• A decline in consumer confidence may constrain the recovery in consumption.
• Port container throughput is below the same period last year, indicating continued pressure on trade-related activity.
• The latest oil demand reading has fallen, suggesting that transport- and industry-related demand may be unstable.
• Energy price supply shocks remain a macro risk that the report emphasizes should be tracked weekly.
• Policy announcements have been frequent, but the pace of implementation and actual transmission effects still need to be observed.

What to watch

• Whether primary and secondary home transactions can maintain year-over-year improvement for several consecutive weeks.
• Whether domestic flights, cancellation rates, and traffic congestion recover in tandem to validate travel demand.
• Whether steel production, coal consumption, and oil demand show a consistent improvement.
• Whether port container throughput recovers to above the same period last year.
• The extent to which local government special bond issuance and project implementation support investment activity.
• Changes in PBOC monetary policy language, the repo rate corridor, and the countercyclical factor in the renminbi fixing.
• Detailed follow-up implementation rules for the growth stabilization, consumption, investment, and employment policies announced since mid-May.