Growth strengthened, but only slightly. In August, industrial output rose 4.2% y/y, up 0.4 pps, lifting overall January-August growth to 3.6%, up 0.1 pps. Investment rose 5.8% y/y in January-August, up 0.1 pps. The August growth rate was 6.4% y/y, up 2.8 pps. Real estate investment growth rate fell further, to -13.8% y/y, down 1.7 pps from August 2021.

In August 2022, consumption rose 5.5% y/y, up 2.7 pps. This is partly due to the low base number of last year, when consumption rose 2.5%, and was down 6 pps from August 2021.

Exports rose 11.8% y/y, down 12.1 pps from July 2022. This seems partially because all major countries except China are exiting from monetary expansion, leading to weakened demand. This month was the first time where exports to the United States had negative growth of -3.8% y/y, dragging down total export growth by 3 pps.

PPI rose 2.3% y/y in August, down 1.9 pps. A major contributing factor is that the production material price growth rate was down 2.6 pps. CPI rose 2.5% y/y, down 0.2 pps from July. Monetary policy remained neutral. At the end of August, M0 rose 14.3% y/y, up 0.4 pps from July. M1 increased 6.1% y/y, down 0.6 pps from July. M2 rose 12.2% y/y, up 0.2 pps.

The offshore exchange rate of the Chinese yuan versus the U.S. dollar recently breached the 7:1 mark for the first time in over two years. Similar to other global currencies that have depreciated in 2022, the yuan’s decline is being driven by the strengthening of the dollar. However, the yuan “basket index” has been relatively stable, and the yuan is unlikely to see significant depreciation, given our forecast of a good balance of payments and overall macroeconomic recovery from further stimulative fiscal policy in the coming months. Other major currency determinants are also sound for the yuan, including a high position for the interest rate and foreign reserves.