Export and Special Local Government Bond Issuance Marginally Accelerate, but Domestic Demand and Real Estate Remain Weak

Overview

This report is JPMorgan’s 58th China alternative data chart pack, focusing on the signal value of June high-frequency data for the upcoming official macro activity releases. The report notes that after June manufacturing PMI was broadly stable, the market is waiting to see whether hard data will confirm near-term economic momentum. High-frequency indicators show improvements in export shipping, special local government bond issuance, and some used-housing transactions, but auto sales, oil processing, new home sales, and some industrial commodity prices remain weak, so macro recovery is showing structural divergence.

Core views

The core view is: first, export-related shipping high-frequency data strengthened at the margin, with outbound container and bulk deadweight tonnage improving month-on-month, and outbound vessel tonnage excluding tankers rising from 7.7% year-on-year in May to 17.2% in June. Second, fiscal policy showed reactive acceleration: special local government bond issuance rebounded clearly, but project-side funding use remains the key uncertainty; if weakness persists, fiscal disbursement in Q3 may speed up. Third, monetary policy remains supportive; the central bank added overnight reverse-repo operations, but in the short term policy focus remains on the 7-day reverse repo; if growth resistance intensifies and inflation risk is manageable, a modest H2 rate cut becomes more likely. Fourth, domestic demand and real estate still face pressure, with auto retail sharply down, new home sales contracting further, and used-home activity improving but losing momentum.

Analysis framework

The report uses high-frequency indicators such as port vessel deadweight, freight indices, flight cancellations, auto retail, industrial startup rates, government bond issuance progress, central bank open-market operations, housing transactions, land sales, and energy and agricultural commodity prices, mapping them to official monthly data for exports, industrial production, retail, fiscals, monetary policy, real estate, and inflation.

Methodology notes

• Macroeconomic High-Frequency TrackingAlternative Data to Official Economic Activity Mapping

  Use high-frequency data from ports, output rates, transactions, prices, and policy operations to forecast monthly macro data.

  The report maps outbound vessel deadweight tonnage to export volume, startup rates at asphalt, tire, rebar, and coke plants to oil processing, auto, and steel production, and housing and land transactions to real estate activity, while food, energy, and industrial prices are mapped to CPI and PPI pressure.

• Policy TrackingFiscal Issuance and Liquidity Pace Monitoring

  Track central government bonds, special bonds, local government debt, MLF, and OMO operations to gauge policy support intensity.

  The report assesses marginal growth support from fiscal and monetary policy by monitoring monthly central government bond issuance, annual issuance progress, rebound in special local government bond issuance, and central bank net open-market injections and absorption.

Asset mapping & comparison

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

• China Government Debt and Rate Assets

  Fiscal issuance and central bank liquidity operations directly affect the yield curve and liquidity expectations.

  Strengths

  Special local government bond issuance has clearly rebounded, and the central bank kept net injections in place; if growth weakness persists, this could lift rate-cut expectations.

  Weaknesses

  The central government bond issuance pace is still behind last year's, so the transmission of a 10-bp cut to real-economy financing may be limited.

  Comparison

  Special local government bond progress is catching up with last year, while central government bond issuance progress is below last year's pace.

  Risks

  If fiscal funds are slow to be deployed to projects, bond issuance may be delayed in its impact on actual growth.

• China Export and Shipping Chain

  Outbound port vessel deadweight and freight indices reflect export volume and external demand conditions.

  Strengths

  June data for outbound container, bulk, and non-tanker vessel deadweight all show improved export volume growth.

  Weaknesses

  Tanker arrivals remain down more than 30% year-on-year, and some trade links are still weak.

  Comparison

  June non-tanker outbound deadweight was +17.2% year-on-year, well above May's +7.7%.

  Risks

  External geopolitics, freight-rate volatility, and global demand shifts could disrupt ongoing export progress.

• Real Estate Chain

  New home, used home, and land sales affect real estate investment, local fiscal health, and credit demand.

  Strengths

  Used home sales continue to improve on a year-on-year basis.

  Weaknesses

  New home sales contraction widened, sales-manager confidence and used-home listing price indices weakened, and land sales still weigh on government-related fund income.

  Comparison

  Used home sales were +12.3% year-on-year in June, below May's +18.0%; 30-city new home sales widened from -1.4% in May to -7.3% in June.

  Risks

  If new home sales remain weak, local fiscal and real estate investment recovery could stay constrained.

• Auto and Consumption Chain

  Passenger and new energy vehicle sales affect retail activity and manufacturing output.

  Strengths

  The new energy vehicle decline is smaller than the overall passenger vehicle decline, indicating some structural resilience.

  Weaknesses

  Passenger car retail was down 21% year-on-year, which may continue to weigh on household consumption.

  Comparison

  NEV sales in June were down 7% year-on-year, better than the overall passenger vehicle decline of 21%.

  Risks

  Subsidy phase-down, declining purchase-tax support, and higher fuel costs could continue to suppress car demand.

• Energy, Chemicals, and Commodities

  Energy and petrochemical prices affect PPI, corporate costs, and inflation expectations.

  Strengths

  After softer energy conditions, gasoline, diesel, LPG, and most petrochemical prices fell, helping reduce input inflation pressure.

  Weaknesses

  Oil processing contraction may deepen, and high copper prices due to AI demand mean some cost pressures have not fully eased.

  Comparison

  Most petrochemical prices have fallen back toward pre-conflict levels, while polyester yarn and methanol remain above pre-conflict levels.

  Risks

  Middle East tensions, global oil prices, and seasonal power/coal demand could push price volatility higher again.

Key data

• June Government Bond Issuance11,380 billion yuanEssentially flat versus May's 11,400 billion yuan.
• June Special Local Government Bond Issuance5,720 billion yuanHigher than May's 1,610 billion yuan, with year-to-date issuance progress rising to 47.0% of the annual target.
• June Central Government Bond Issuance3,180 billion yuanClose to half of May's 7,080 billion yuan, with year-to-date progress at 40.2% of the annual target.
• Outbound Vessel Deadweight (Excluding Tankers)June year-on-year +17.2%Up from +7.7% in May, indicating improving export volume growth.
• Outbound Container Vessel DeadweightJune year-on-year +4.6%, non-seasonally adjusted month-on-month +8.5%Container cargo generally corresponds to consumer goods, some machinery, and electronics trade.
• Outbound Bulk Carrier DeadweightJune year-on-year +20.9%, non-seasonally adjusted month-on-month +10.1%Bulk carriers mainly transport grains, coal, iron ore, steel, and other bulk commodities.
• Tanker ArrivalsJune year-on-year down more than 30%Remains weak, similar to May.
• June Passenger Vehicle RetailYear-on-year -21%Affected by weaker substitution subsidies, reduced purchase tax exemptions, and higher fuel costs.
• June New Energy Vehicle SalesYear-on-year -7%The decline is narrower than that of total passenger vehicles.
• 30-City New Home SalesJune year-on-year -7.3%The contraction widened versus May's -1.4%.
• Used Home Sales in Major CitiesJune year-on-year +12.3%Still improved, but below May's +18.0%.
• PBOC June Liquidity OperationsNet injection of about 5,826 billion yuan via 7-day reverse repo, MLF injection of 2,000 billion yuan, and 3,000 billion yuan drained through fixed-term reverse repoOvernight reverse repo was started at month-end, with no rate disclosed.
• Agricultural Food PricesJune year-on-year -0.5%The drag narrowed versus May's -0.9%.
• Pork Wholesale PricesJune year-on-year -28.3%Close to May's -28.5%, indicating continued industry overcapacity.
• Domestic Refined-Crude Product Price AdjustmentJuly 3: gasoline and diesel adjusted down by 950 yuan/ton and 915 yuan/ton respectivelyThe largest cut of the year in the context of weaker global oil prices.

Impact & implications

For macro assets, the improvement in high-frequency export data and faster fiscal issuance helps ease concerns about near-term growth deceleration, but domestic demand, autos, real estate, and parts of industrial production still indicate underlaying demand weakness. If subsequent official activity data continue to be soft, expectations for Q3 fiscal spending and H2 monetary easing may intensify. However, the report also notes that a 10-bp rate cut is more of a signaling move and that actual easing transmission is likely limited. For commodities and the inflation chain, falling energy prices and negative growth in food prices help reduce inflation pressure, while also signaling that demand-side recovery remains weak.

Risks

• Faster special local government bond issuance does not guarantee timely project delivery, so fiscal multiplier effects may lag or fall short of expectations.
• Domestic-demand-related indicators such as auto sales, new home sales, and oil processing remain weak, which could leave official activity data below market expectations.
• External geopolitics and freight-rate volatility may affect the sustainability of export and shipping chains.
• If the Fed turns more hawkish, the RMB and cross-border spread backdrop could make China's monetary easing path more complex.
• Falling energy and food prices lower inflation pressure, but may also reflect weak demand, which could affect corporate earnings and PPI recovery.

What to watch

• Official Chinese hard activity data over the next two weeks, especially industrial production, retail sales, exports, and fixed-asset investment.
• The speed at which fiscal funds are actually allocated to projects in Q3 and the real construction progress after special local government bond issuance.
• 7-day PBOC reverse repo rates, MLF operations, and whether a 10-bp cut signal emerges.
• Whether 30-city new home sales, major-city used home transactions, land sales, and housing expectation indicators improve.
• Whether outbound port vessel deadweight, CCFI freight levels on key routes, BDI, and tanker arrival data continue to improve.
• Domestic-demand and industrial high-frequency indicators such as auto retail, NEV sales, tire plant and steel startup rates.
• The subsequent CPI and PPI impact of energy, petrochemical, agricultural commodity, and pork prices.