China monthly macroeconomic data preview: Nomura expects only a limited China growth rebound in Q3 as strong exports offset persistent domestic weakness

Overview

This monthly China data preview argues that September should show a modest, largely seasonal improvement led by exports and policy efforts, while underlying domestic demand remains weak. Nomura maintains a below-consensus forecast of 4.3% year-on-year real GDP growth for Q3.

Core views

Nomura expects China’s activity data to improve modestly in September because of favorable seasonality, strong export momentum and increased policy efforts. It nevertheless characterizes the recovery as contained, particularly for domestic-demand indicators, and retains its 4.3% year-on-year Q3 GDP forecast versus consensus at 4.5%. The State Council’s more urgent tone toward meeting the 4.5–5.0% annual growth target may accelerate spending, policy-bank lending and central-bank lending, but Nomura expects the overall policy package to remain modest. It argues that strong exports reduce the need for conventional stimulus and that limited room for such measures constrains their economic impact; deeper recovery would require non-performing debt cleanup and more sophisticated public-finance and social-security reforms. Its supply-side assessment supports broadly unchanged Q3 growth. Industrial-production growth accelerated to 4.9% year-on-year in July–August from 4.6% in Q2 and is projected at 5.0% for Q3, while services-output growth slowed to 4.2% from 4.5% and is also projected at 4.2%. Because industry and services account for 30% and 58% of GDP respectively, Nomura expects real GDP to remain roughly unchanged from Q2. On the expenditure side, however, average monthly nominal retail-sales growth improved only to 0.5% in July–August from 0.2% in Q2, while fixed-asset-investment growth worsened to -11.7% from -9.7%. USD export growth rose to 24.4% from 20.1%. Nomura forecasts Q3 nominal growth of 0.7% for retail sales, -10.8% for fixed-asset investment and 25.5% for exports, and notes that official GDP is likely to track production-side conditions more closely because China calculates GDP primarily from the production side. For September surveys and production, Nomura forecasts the official manufacturing PMI at 50.0 from 49.8 in August and the non-manufacturing PMI at 49.2 from 49.0, supported by seasonality and stepped-up policy efforts. It expects the RatingDog manufacturing PMI, which has greater exposure to SMEs and eastern-coastal exporters, to increase to 51.7 from 51.5. The export backdrop includes 10.2% year-on-year growth in weekly container throughput at major ports during 1–27 September, compared with -2.0% in August, and 48.7% growth in Korea’s imports from China during 1–20 September, versus 32.6% in August. Nomura links this strength partly to the global AI supercycle. Industrial-production growth is forecast to edge up to 5.4% from 5.2%, aided by exports and oil-related production as crude imports recover; September crude imports were running at 7.84mn barrels per day versus 7.25mn in August, although still 25.7% below year-earlier levels. Domestic conditions remain fragile. Nomura expects September retail-sales growth to edge up to 1.1% year-on-year from 0.4%, helped by a lower base and the Mid-Autumn Festival falling within September. It views the improvement as insufficient to signal a stronger consumption trend because scaled-back trade-in support, subdued consumer confidence, and higher imported-inflation costs for fuel and consumer electronics continue to weigh on spending. Autos are expected to be the main drag: auto retail-sales growth is forecast at -19.3%, and passenger-car retail-sales volumes at around -23%, reflecting the reduced trade-in program and the rise in EV purchase tax from zero to 5% effective January 2026. Catering is expected to remain soft, while non-auto merchandise growth is projected to remain subdued across durable goods. Fixed-asset-investment growth is forecast to improve only slightly to -9.2% year-on-year in September from -10.6%, with year-to-date growth deteriorating to -7.5% from -7.2%. Nomura sees no material recovery because actual fiscal spending is likely to lag the rebound in government-bond issuance, limiting infrastructure support. It identifies faster deployment of RMB800bn in new policy-based financial instruments, particularly projects linked to the “Six Networks” initiative, as a more positive development. Property investment is expected to remain in deep contraction at -25.0% year-on-year, little changed from -25.4%. High-frequency home-sales measures improved, including existing-home sales volume in 18 cities at 15.8% year-on-year during 1–24 September versus 7.7% in August, but the Iceberg index of lowest listing prices fell 0.7% month-on-month, worse than the 0.5% decline in August. External trade is expected to remain the key offset. Nomura forecasts export growth of 27.7% year-on-year in September, up from 25.0%, and import growth of 24.5%, down from 28.2% because of a higher base. Higher crude prices, with a shipping lag from the Persian Gulf to China, and rising semiconductor prices—especially memory chips—are expected to lift import values, even as crude-import volume growth remains negative. The trade surplus is forecast to widen to USD121.1bn from USD119.1bn. Supporting indicators include the China Import Dry Bulk Freight Index tracking at 52.3% year-on-year in September month-to-date, versus 40.6% in August, and Brent price growth at 70.7% versus 33.2%. Inflation is projected to rise mainly because of external price pressures rather than a domestic-demand recovery. CPI inflation is forecast at 0.9% year-on-year in September from 0.8%, with month-on-month inflation moderating to 0.2% from 0.4%. Higher oil and chip prices are the primary drivers, while food-price data point to softness: the Agricultural Product Wholesale Price Index rose 1.6% month-on-month after 2.7% in August, and its year-on-year change fell to -1.2%. Retail gasoline-price increases of RMB260 per tonne on 12 September and RMB395 per tonne on 25 September could add 0.16 percentage point to headline month-on-month CPI, while gold is estimated to subtract 0.05 percentage point from year-on-year CPI. PPI inflation is forecast at 4.3% from 3.8%, supported by oil, metals and chip prices. Oil-related sectors account for 14.1% of the PPI basket, non-ferrous-related industries 7.3%, and computer, communications and other electronic-equipment manufacturing 12.8%. Nomura expects the Q3 GDP deflator to remain close to Q2’s 1.6% year-on-year reading, as Q3 CPI and PPI averages are projected at 0.7% and 3.9%, respectively. Credit conditions are also expected to soften. Outstanding aggregate-financing growth is forecast to slow to 7.1% year-on-year from 7.2%, and outstanding RMB-loan growth to 4.8% from 4.9%. Nomura forecasts RMB3,361bn in new aggregate financing and RMB1,118bn in new RMB loans, both below year-earlier levels of RMB3,530bn and RMB1,290bn. Government net bond financing reached RMB1,566bn month-to-date as of 28 September, above RMB1,174bn a year earlier, but corporate net bond financing was -RMB38bn versus RMB227bn, and LGFV financing was -RMB100bn versus -RMB75bn. Liquidity was broadly stable, with the average DR007 at 1.40%, matching August and the PBoC’s seven-day reverse-repo rate, while the average 10-year CGB yield declined to 1.683% from 1.699%.

Analysis framework

Nomura assesses Q3 growth through supply-side and expenditure-side indicators for July–August combined with September forecasts. It then cross-checks activity, trade, inflation, property and credit forecasts against high-frequency indicators, seasonal patterns, policy developments and sector-specific price or volume data.

Methodology notes

• Industry AnalysisSupply-demand framework

  Supply- and demand-side GDP assessment

  The report compares industrial and services output with retail sales, fixed-asset investment and exports to assess Q3 growth and explain why official GDP may follow production-side conditions more closely.

• Industry AnalysisVolume-price decomposition

  Trade and inflation decomposition using volumes and prices

  Nomura distinguishes export and import momentum, crude-import volumes, freight measures, oil prices and chip prices to explain trade values and CPI/PPI outcomes.

Key data

• Q3 real GDP growth forecast4.3% y-o-yBelow consensus of 4.5% y-o-y
• September export growth forecast27.7% y-o-yUp from 25.0% in August
• September retail sales growth forecast1.1% y-o-yUp from 0.4% in August but still weak
• September fixed-asset-investment growth forecast-9.2% y-o-yImproves from -10.6% in August; year-to-date growth forecast at -7.5%
• September CPI and PPI inflation forecasts0.9% y-o-y and 4.3% y-o-yUp from 0.8% and 3.8%, respectively, mainly due to higher oil and chip prices
• September property-investment growth forecast-25.0% y-o-yLittle changed from -25.4% in August
• Outstanding aggregate-financing growth forecast7.1% y-o-yDown from 7.2% in August

Impact & implications

Nomura’s forecast describes an unbalanced economy in which export strength and modest policy support prevent a sharper slowdown, but do not produce a broad domestic-demand recovery. Rising headline inflation is attributed primarily to external commodity and chip prices, while weak investment, property activity, consumption and credit constrain the growth outlook.

Risks

• Domestic demand could remain weaker than expected as consumer confidence, auto demand, durable-goods spending and fiscal expenditure remain subdued.
• The property downturn may persist, with investment expected to remain deeply negative and listing-price indicators continuing to fall.
• Policy support may have limited impact because Nomura expects the package to be modest and conventional stimulus space to be constrained.
• Credit growth may weaken further as corporate bond issuance becomes a drag despite stronger government bond issuance.

What to watch

• September official manufacturing, non-manufacturing and RatingDog PMI releases.
• September activity data, including industrial production, retail sales, fixed-asset investment and property indicators.
• September trade, CPI, PPI, aggregate-financing and RMB-loan releases.
• Deployment of RMB800bn in policy-based financial instruments and the pace at which fiscal spending follows bond issuance.
• The fifth plenary session of the 20th Central Committee on 26–29 October, the mid-November PBoC Q3 monetary policy report, and the Central Economic Work Conference in mid-December.