SNAPSHOT2 min read

The only way is up for China’s economy

Second quarter GDP growth may have slowed, but June’s data suggests a turning point has been reached.



Craig Botham
Senior Emerging Markets Economist

Chinese real GDP growth slowed to 6.2% year-on-year (y/y) in the second quarter, following a strong-than-expected performance of 6.4% y/y in the previous quarter.

Given the weak macroeconomic data in April and May, some weakness is unsurprising, and there looks to be some payback from the freakishly strong data prints in March. However, with the distortions arising from policy changes now played out, the better data for June is an encouraging sign for activity in the third quarter.

Slowing growth, despite policy support

The average growth rates for high frequency data support the story told by GDP, with fixed asset investment, industrial production, trade and retail sales all slower over the quarter. The weakness in investment will be of particular concern to the central government which has enacted an array of policies this year aimed at revving the engine in this sector.

Yet despite tax cuts for manufacturers and an easing of conditions for local governments, both manufacturing and infrastructure investment were sharply weaker in the second quarter. Only property investment managed to hold up.

More stimulus likely

More stimulus seems likely, and we expect announcements either this week or next. However, the magnitude will be modest, for a couple of reasons:

Firstly, even though this is the slowest rate of growth in over two decades, it does not yet imperil official targets, and the government will want to keep some powder dry in the event of greater external shocks.

Secondly, while the quarter’s data was disappointing, the weakness was very much concentrated in the first two months. June has seen strong rebounds in industrial production, retail sales, and a modest pick up in investment. We think a lot of the weakness in the quarter was payback for frontloaded activity in March, driven by the perverse incentives of tax and other policy changes at that time.

Third quarter recovery still on the cards

Consequently we stick to our forecast for a recovery in the third quarter, and expect to see easing from the central bank and additional fiscal support provided by the central government by the end of July. Action now should help cement the turning point in the data and support growth through to the end of the year.

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.


Craig Botham
Senior Emerging Markets Economist


Asia ex Japan
Craig Botham
Economic views
Emerging Markets

Please consider a fund's investment objectives, risks, charges and expenses carefully before investing. The Schroder mutual funds (the “Funds”) are distributed by The Hartford Funds, a member of FINRA. To obtain product risk and other information on any Schroders Fund, please click the following link. Read the prospectus carefully before investing. To obtain any further information call your financial advisor or call The Hartford Funds at 1-800-456-7526 for Individual Investors.  The Hartford Funds is not an affiliate of Schroders plc.

Schroder Investment Management North America Inc. (“SIMNA”) is an SEC registered investment adviser, CRD Number 105820, providing asset management products and services to clients in the US and registered as a Portfolio Manager with the securities regulatory authorities in Canada.  Schroder Fund Advisors LLC (“SFA”) is a wholly-owned subsidiary of SIMNA Inc. and is registered as a limited purpose broker-dealer with FINRA and as an Exempt Market Dealer with the securities regulatory authorities in Canada.  SFA markets certain investment vehicles for which other Schroders entities are investment advisers.”

For illustrative purposes only and does not constitute a recommendation to invest in the above-mentioned security/sector/country.

Schroders Capital is the private markets investment division of Schroders plc. Schroders Capital Management (US) Inc. (‘Schroders Capital US’) is registered as an investment adviser with the US Securities and Exchange Commission (SEC).It provides asset management products and services to clients in the United States and Canada.For more information, visit

SIMNA, SFA and Schroders Capital are wholly owned subsidiaries of Schroders plc.