The People’s Bank of China (PBOC) announced on August 20 that the 1-year and 5-year Loan Prime Rates (LPR) would remain unchanged at 3.35% and 3.85%, respectively, in line with market expectations. In July, the PBOC had lowered the 7-day reverse repo rate, leading to a 10 basis point reduction in both the 1-year and 5-year LPRs, as part of efforts to address the domestic economic slowdown.

However, the economic data for July, released on August 15, continue to raise concerns about China’s economic outlook. Retail sales increased from 2.0% in the previous month to 2.7%, and the year-over-year CPI growth rose from 0.2% to 0.5%. However, the core CPI, which excludes the more volatile food and energy prices, grew by only 0.4%, down from 0.6% in the previous month.

Additionally, the year-over-year growth rates for industrial production, fixed asset investment, and real estate development investment in July were 5.1% (down from 5.3% in June), 3.6% (down from 3.9% in June), and -10.2% (down from -10.1% in June), respectively, indicating a continued downward trend.

The urban survey unemployment rate, released on August 16, showed that the national unemployment rate rose by 0.2% in July compared to the previous month. The unemployment rate for the 16-24 age group, which reflects the employment situation of young people, reached 17.1%, marking a new high since the metric was adjusted in 2023.

Overall, China’s sluggish real estate market continues to weigh on domestic investment, consumer demand, and the labor market. The Chinese government may need to introduce larger-scale fiscal policies and adjust interest rates soon to stabilize the domestic economy and achieve its annual GDP growth target.