Economics | 15 August 2022 Analyst certifications and other disclosures on last page. This research report has been created by CCB International Securities Ltd. 1 7月数据显示经济持续复苏，但动能放缓。汽车及装备制造行业主导7月工业生产的修复，同时贸易活动再次超预期增长，显示供应链紧张缓解。然而内需仍受疫情拖累，住房部门持续疲软，带慢复苏步伐。近期部分地区疫情再起仍可能为未来几个月经济复苏带来下行风险。 预计政策将维持宽松，尽管价格压力上升。央行周一超预期将1年期MLF及7天逆回购利率下调10个百分点，尽管7月份CPI通胀受食品价格上涨带动已经展现出上涨趋势。我们预计近期货币政策将维持宽松以对冲增长风险。财政政策预计继续发力以托底经济，如加大税收及补贴措施、加强基建投资等。房地产的定向宽松政策也料将持续。 July data shows continuing, albeit slowing growth. The recovery in IP was led by auto and equipment manufacturing, as trade data once again outperformed, reflecting an alleviation in supply chain disruptions. However, soft domestic demand amid Covid concerns and the weak property sector are holding back what would otherwise be a fast recovery. Rising Covid cases will pose an additional headwind to growth in coming months. Policy likely to remain accommodative despite rising price pressure. After CPI started to climb in July, reflecting rising food prices, the PBoC unexpectedly cut both the 1-year MLF and 7-day reverse repo rate by 10 bp each. We expect monetary policy to stay accommodative in the near-term to counter growth risks. More fiscal support, including further tax and subsidy measures and more infrastructure investment, as well as continued support to the housing sector to ease liquidity pressure, will likely continue. Li Cui (852) 3911 8274 cuili@ccbintl.com Ying Zhang (852) 3911 8241 zhangying@ccbintl.com CCBI SECURITIES | RESEARCH China Economics Update: July data falls short; policy to remain accommodative 中国经济评论: 七月数据修复力度不及预期，经济复苏仍需政策支持托底 Economics | 19 August 2022 CCBI SECURITIES 2 Industrial activity and retail sales underperformed Industrial production (IP) climbed 3.8% YoY in July after a 3.9% YoY gain the prior month. That was below the market expectation of a 4.5% YoY rise. On a sequential basis, IP picked up by 0.4% MoM, following a 0.8% MoM gain in the prior month. Changes by sector include the following:  Mining grew 8.1% YoY in July, down slightly from an 8.7% YoY gain in June. Electricity and utility production advanced 10.4% YoY, up dramatically from 3.3% YoY the previous month.  Manufacturing production climbed 2.7% YoY, after a strong rebound of 3.4% YoY in June. High-tech sectors such as electric machinery and computer and electronic equipment manufacturing once again delivered strong growth, though the momentum slowed a bit. Upstream industries such as ferrous and non-ferrous metal smelting and pressing slowed, likely reflecting still soft construction demand. Most of the other sectors continued to improve though at a lower pace (Fig 1).  In particular, auto production rebounded 22.5% YoY after a 16.2% gain in June as the number of Covid-induced logistics disruptions and parts shortages continued to decline. Retail sales extended its recovery, albeit at a slower pace. Headline retail sales advanced 2.7% YoY in July after a strong recovery of 3.1% YoY the previous month. The result was still below market consensus expecting 5.0% YoY growth. Online sales advanced 10.1% YoY compared with an 8.2% rise the previous month (Fig 2). The contraction in catering narrowed to -1.5% YoY compared with a 4% YoY decline in June, indicating the resumption in off-line activities continues as Covid control measures are gradually lifted. However, expansion in goods consumption eased to 3.2% against a 3.9% gain in June. Among all retail sale items, spending rose on high-end goods such as gold, silver, and jewelry, household electrics, and video and communication applications. Spending on daily used goods, cosmetics, and medicine all fell. FAI growth sustained. July FAI data came in at 5.7% YoY YTD, representing a moderation from the 6.1% rise in the first half of this year. The result was also lower than the market expectation of 6.3% YoY YTD (Fig 3). In July alone, FAI growth was 3.6% YoY, down from 5.8% YoY in June. By category:  Infrastructure investment accelerated. Investment in traditional infrastructure such as transportation, postal services, water and environmental infrastructure, picked up 9.1% YoY in July versus 8.2% YoY in June. With utilities included, broad infrastructure investment was still strong, having risen 10.1% YoY compared with 11% YoY the prior month. Investment in green energy rose as investment in electricity, gas and water production rose 15.1% YoY in July against 24.1% YoY in June.  Manufacturing FAI growth slowed in July, having risen 7.5% YoY in the month compared with 9.9% in June. According to NBS, expansion in high-tech manufacturing investment is up 22.9% YoY YTD in the first seven months of the year, which is strong. This is consistent with our view of a new capex cycle in China, despite the macro challenges.  Real estate investment contracted 12.1% YoY in July, down fu