China high-frequency economic activity diverges, with energy price shocks prompting an increase in tracking frequency to weekly

Overview

The report updates China economic activity and policy high-frequency indicators on a weekly basis, covering four modules: consumption and travel, production and investment, other macro activity, and markets and policy. Because of the need to closely monitor the impact of energy price supply shocks on China's economy, the research team has shifted the tracking report to weekly publication. Indicators in this issue are generally mixed, with service consumption and some energy demand improving, while real estate, steel, port logistics, and some policy financing indicators are weak.

Core views

In consumption and travel, both new and second-hand home transactions fell from the previous week, but second-hand home transactions remained above the same period last year; domestic flight activity improved, and the consumer confidence index rose. In production and investment, steel demand and output continued to decline, while average daily coal consumption in coastal provinces rebounded but remained slightly below the same period last year. In foreign trade and logistics, port throughput and outbound freight volumes weakened, import and export prices diverged by category, and U.S. soybean export sales to China remained low. In policy and financial conditions, special bond issuance progress was below the same period last year, and PSL balances contracted; interbank repo rates rose, but the overnight rate was below the 7-day open market operation rate. The renminbi appreciated against the USD and depreciated against the CFETS currency basket, reflecting divergent performance between bilateral and effective exchange rates.

Analysis framework

The research uses multiple high-frequency indicators to cross-validate economic activity and combines weekly changes, year-on-year positioning, and policy variables in the analysis. Indicators cover real estate transactions, air and road travel, energy and chemical prices, steel supply and demand, power-sector coal consumption, fiscal and policy finance, PMI employment sub-indices, port logistics, import and export prices, agricultural trade, oil demand nowcasts, money market rates, and the renminbi exchange rate.

Methodology notes

• Macro monitoringFour-module high-frequency economic activity tracker

  Assess short-term economic momentum using four categories of indicators: consumption and travel, production and investment, other macro activity, and markets and policy.

  Identify the direction of economic activity by comparing the latest week's sequential changes with levels in the same period last year, and corroborate signals across multiple indicators to avoid reliance on a single data source.

• NowcastingGS China oil demand nowcast

  Use high-frequency information to estimate the latest level of China's oil demand.

  The nowcast provides a high-frequency demand measure, different from the balance-sheet framework updated every six weeks based on supply and demand estimates; the latest reading is 16.4mb/d.

• Labor marketWeighted PMI employment sub-index

  Assess employment changes by combining multiple manufacturing, construction, services, and recruitment indicators.

  This indicator includes the NBS manufacturing, construction, and services PMI employment sub-indices, as well as employment or recruitment indicators related to RatingDog, CKGSB, and emerging industries; the July reading rose slightly.

• Data comparabilityTraffic congestion data source transition

  Address sample coverage differences caused by a change in map providers.

  Since 2022, the congestion data source has changed from Gaode map to Baidu map; the latter data begin in September 2021. The trends of the two are similar, but city coverage is 100 and 98 cities, respectively, so changes in methodology should be noted in cross-period comparisons.

Asset mapping & comparison

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

• China government bonds and RMB rates

  Direct mapping of economic momentum and money market liquidity

  Strengths

  Weak industrial, real estate, and logistics conditions may sustain expectations for pro-growth and easing policies, and the overnight repo rate remains below the 7-day open market operation rate.

  Weaknesses

  Interbank repo rates rose week-on-week, and higher energy prices may also limit further downside in rates.

  Comparison

  Weak growth factors and higher energy costs plus rising short-term funding rates offset each other.

  Risks

  Stronger-than-expected policy deployment, rising energy inflation, or rapid liquidity tightening could trigger yield volatility.

• Renminbi (CNY)

  Influenced by growth expectations, policy divergence, and external exchange rates

  Strengths

  The renminbi appreciated against the USD over the most recent week, showing some resilience in the bilateral exchange rate.

  Weaknesses

  The renminbi depreciated against the CFETS currency basket, and some domestic demand and industrial indicators remain weak.

  Comparison

  Performance against the USD was stronger than performance against a basket of currencies.

  Risks

  Energy import costs, capital flows, trade prices, and policy divergence between China and overseas markets may amplify exchange rate volatility.

• China energy and industrial commodities

  Highly related to production activity, transport demand, and cost shocks

  Strengths

  Coastal coal consumption rebounded, China's oil demand nowcast rose to 16.4mb/d, and export prices of integrated circuits and aluminum increased.

  Weaknesses

  Steel demand and output continued to decline, major chemical product prices were broadly stable, and some crude oil and refined oil import and export prices fell.

  Comparison

  Energy demand indicators improved relatively, while indicators in construction and industrial chains such as steel were weak.

  Risks

  Supply shocks, refined oil price adjustments, changes in global demand, and inventory cycles may cause sharp price volatility.

• China real estate and related value chains

  Real estate transactions affect construction, steel, local fiscal revenue, and credit demand

  Strengths

  Second-hand home transaction volume in 16 cities remained above the same period last year.

  Weaknesses

  New home transaction volume in 30 cities was slightly below the same period last year, and both new and second-hand home transactions declined from the previous week, with steel demand weakening at the same time.

  Comparison

  The second-hand housing market performed better year-on-year than the new home market, but short-term sequential momentum in both declined.

  Risks

  Continued weakness in sales could drag on development investment, building materials demand, local fiscal revenue, and household confidence.

• China equity market

  Macro activity and policy expectations affect valuations in cyclical, consumption, transportation, and financial sectors

  Strengths

  Improvements in aviation activity, consumer confidence, coal consumption, and oil demand are favorable for some consumption, travel, and energy-related industries.

  Weaknesses

  Weakness in real estate, steel, and port logistics is unfavorable for earnings expectations in property-chain, industrial, and transportation-related sectors.

  Comparison

  Signals related to service consumption are relatively stronger, while signals for real estate and some heavy industries are relatively weaker.

  Risks

  Rising energy costs, weaker-than-expected policy implementation, and continued divergence in macro data may weigh on risk appetite.

Key data

• Domestic gasoline price adjustmentRaised by 685 RMB/tonneThe adjustment date was July 31, 2026.
• Domestic diesel price adjustmentRaised by 655 RMB/tonneThe adjustment date was July 31, 2026.
• Local government special bond issuanceRMB 2.45 trillion year-to-dateIssuance remains below the same period last year.
• PSL loan balanceNet decrease of RMB 116 billion in JulyPolicy finance support appears to have contracted based on this indicator.
• China oil demand nowcast16.4mb/dThe latest high-frequency reading increased from the previous reading.
• Real estate transactionsNew homes slightly below the same period last year; second-hand homes above the same period last yearTransaction volumes for new homes in 30 cities and second-hand homes in 16 cities both declined from the previous week.
• Money market liquidityOvernight repo rate below the 7-day open market operation rateInterbank repo rates overall rose slightly from the previous week.
• Renminbi exchange rateAppreciated against USD and depreciated against the CFETS currency basketThe bilateral exchange rate and effective exchange rate diverged in direction over the most recent week.

Impact & implications

High-frequency data have not yet shown broad and synchronized economic acceleration. Improvements in air travel, consumer confidence, coal consumption, and oil demand may provide some support for service consumption and energy demand; however, weaker real estate transactions, declining steel supply and demand, and slower port logistics suggest continued pressure on domestic demand, the construction chain, and foreign trade activity. Higher energy prices may raise costs for enterprises and households and affect inflation, margins, and the policy pace. Slower special bond issuance and PSL contraction mean that the pace of subsequent fiscal deployment and policy finance support will be key to judging the sustainability of growth improvement.

Risks

• Energy price supply shocks intensify and further push up production costs for enterprises and travel costs for households.
• Real estate transactions continue to weaken, dragging on investment, steel demand, credit expansion, and local fiscal revenue.
• Declines in steel production, port throughput, and freight volumes evolve into a broader slowdown in industry and foreign trade.
• Special bond issuance and policy finance deployment are slower than expected, resulting in insufficient transmission of pro-growth policies.
• A weaker renminbi effective exchange rate or changes in cross-border capital flows increase market volatility.
• Some high-frequency indicators are affected by sample coverage, data source changes, and seasonality, so single-week changes may not necessarily represent a trend.
• U.S. soybean export sales to China remain sluggish, reflecting continued uncertainty in agricultural trade relations and supply chains.

What to watch

• Subsequent reactions in consumption, transportation, industrial profits, and inflation indicators after domestic gasoline and diesel price increases.
• Whether transactions of new homes in 30 cities and second-hand homes in 16 cities can stabilize, and whether steel demand improves in tandem.
• Changes in special bond issuance progress, PSL balances, and major macro policy announcements.
• Whether port container throughput and outbound vessel freight volumes at 20 major ports stop declining.
• The sustainability of coastal coal consumption, oil demand nowcasts, and major chemical product prices.
• The relationship among interbank repo rates, the overnight rate, and the 7-day open market operation rate.
• Whether the divergence between the renminbi's movements against the USD and the CFETS currency basket continues.
• Whether improvement in PMI employment sub-indices can spread to broader employment and income indicators.