AsiaIn this week's newsletter, we explore several key and current issues in Asia. China’s recent data has continued to disappoint, following its weak performance in Q2, with monthly readings still reflecting an uneven recovery. Additionally, the property sector remains troubled, with no end in sight for its struggles and house prices continuing to fall. Given these developments and with only a few months left in the year, China's prospects of achieving its 5% growth target appear increasingly uncertain. We also examine the state of Japan’s carry trade. Recent weeks have shown signs of stabilization after the volatility that followed the Bank of Japan's (BoJ) meeting. Finally, we review last week’s interest rate decisions in South Korea, Indonesia, and Thailand, where policy rates were kept unchanged across the board. The decision to maintain the status quo reflects various domestic considerations. However, central banks are also influenced by external factors, such as the anticipated path of US interest rates. In this context, Fed Chair Powell indicated in his recent Jackson Hole speech that the Fed plans to begin its rate cut cycle in September. This development may prompt central banks in Asia to consider similar actions soon.
China China’s recent economic data have been increasingly disappointing, as depicted in Chart 1. For instance, Q2 GDP growth of 4.7% y/y fell short of expectations. Latest monthly data have been more mixed: industrial production and fixed asset investment slowed further in July, while the unemployment rate increased and retail sales growth strengthened. This highlights the uneven nature of China’s economic recovery, with weak consumer sentiment and persistent challenges in the property sector. In response, Chinese authorities have implemented a range of measures to boost demand. These include interest rate cuts in July, and targeted initiatives to stimulate demand and address excess supply in the property market. While these actions may provide some immediate relief, more comprehensive reform initiatives could offer a better path to long-term economic stability. Given the ongoing challenges, China's prospects of achieving its 5% growth target appear increasingly uncertain.
