China: Policy Support and Structural Shifts — HSBC

HSBC strategists, in their latest report, reviewed China's July economic data and the Politburo meeting guidance, noting that the current economy presents a divergent pattern of "traditional drivers slowing and emerging drivers providing support." Retail sales and fixed asset investment have slowed, reflecting ongoing pressure on domestic demand and traditional investment; meanwhile, industrial production and exports are supported by demand related to artificial intelligence and green technologies, emerging as structural bright spots.

**Policy Signals: Clear Pro-Growth Stance**

According to HSBC strategists, the latest Politburo meeting guidance signaled further policy support. The report suggests that policymakers have elevated the priority on economic stability, with potential coordinated fiscal and monetary measures to offset weak domestic demand. However, the report did not provide specific forecasts on policy tools or scale, emphasizing instead that "the direction of support is clear, but the intensity remains to be seen."

**Structural Divergence: Accelerating Shift from Old to New Growth Drivers**

Looking at July data, the traditional fixed asset investment chain, reliant on real estate and infrastructure, continued to slow, while manufacturing sectors related to artificial intelligence and green technologies demonstrated greater resilience. HSBC strategists believe this divergence is not a short-term fluctuation but a continuation of a structural transformation—the share of high value-added products in exports is rising, and the contribution of emerging industries to industrial production is increasing, indicating that policy support is also tilting toward these areas.

**Market Implications: Focus on Policy Implementation**

The report notes that the market has already partially priced in policy expectations, and the key going forward lies in the pace and actual intensity of policy implementation. HSBC strategists advise investors to monitor fiscal expenditure progress, credit data changes, and the sustainability of orders in emerging industries to assess whether structural support can offset the slowdown in traditional drivers.