Ren Zeping: Economic overheating means that it is time to go all out and spur economic growth.

The economy is overheating, and it is time to fully engage in economic efforts. From a macro perspective, it is about data, while from a micro perspective, it is about the joys and sorrows of countless families. People engaged in economic research must have a sense of human care. They should uphold the spirit of scientists and maintain a constructive attitude. In recent years, China has made positive progress in developing new energy, digital economy, artificial intelligence, controlling housing prices, and reducing financial leverage, resolving many longstanding and difficult historical issues with great determination and courage, laying a solid foundation for sustainable high-quality development. However, at the same time, the economy continues to decline, and there are even signs of long-term and substantial overheating, making the situation increasingly severe. Looking at industrial production, the value-added of industries above designated size decreased by 0.6% month-on-month in August, with a year-on-year growth of 4.5%. From the perspective of the three key drivers of the economy, consumption and investment in August were close to zero growth, with rates of 2.1% and 2.0% respectively, showing weak domestic demand. Mainly relying on exports, which grew by 8.7% year-on-year in August, but export prices decreased. There is significant uncertainty in future external demand. On September 13, the United States decided to impose substantial tariffs on Chinese goods, including a 100% tariff on electric cars, 50% on CECEP Solar Energy batteries, 50% on Chinese semiconductors, and 25% on Chinese steel, aluminum, electric vehicle batteries, and key minerals. In terms of prices, the Producer Price Index (PPI) has been negative for over 20 months, while the Consumer Price Index (CPI) remains close to 0, a rare historical occurrence, highlighting deflationary pressures. Looking at financial data, both M1 and social financing have continued to slow down, with companies reluctant to lend, and residents practicing precautionary savings, leading to low economic activity. In terms of fiscal data, amid a year-on-year decrease of 5.4% in national tax revenue from January to July, non-tax revenue increased by 12% to 2.44 trillion yuan. It has become a common phenomenon for local governments to owe salaries, with a large number of small and medium-sized enterprises being owed project funds by local governments, leading to a wave of layoffs and salary cuts. Regarding employment, the urban survey unemployment rate for the 16-24 age group (excluding students) in July was 17.1%, an increase of 3.9 percentage points from the previous month; the consumer confidence index in July was 86.0, the lowest since 2023. The combination of unemployment pressure and weak consumption is creating a negative cycle. Looking at asset prices, both the stock market and the property market have been declining for nearly three years, with most major stock indices (excluding bank stocks) falling by more than half, and the ChiNext Index falling by more than half. From January to August, the year-on-year decline in sales area of new commercial housing was 18%, with average price declines of around 30% in first and second-tier cities, and even halved in suburban areas and third and fourth-tier cities. The substantial reduction in household assets is leading to continued downgrading of consumption. Recently, I deeply feel that the most urgent task is to fully engage in economic efforts, as development is the fundamental solution to all problems. Healthy economic growth and employment are the foundation for addressing US strategic containment, ensuring a good life for the people, and moving towards high-quality development. The current priority is to quickly prevent deflation traps and sustained economic downturns, adopt large-scale economic stimulus measures, protect the vitality of private economy, vigorously expand demand, and respond to the needs of society. In terms of fiscal policy, deficit can be increased within the year, expedite the issuance of special bonds, make good use of ultra-long-term special national bonds, increase support for new infrastructure and new productive forces to generate more physical output, and introduce local special national bonds to repay debts owed to enterprises by local governments, alleviating the pressure on local finances and businesses. For monetary policy, there is still room for comprehensive force, including reserve requirement ratio cuts and interest rate cuts; with expectations of a possible interest rate cut by the US Federal Reserve, the continuous appreciation of the Renminbi since mid-August has weakened the constraints of exchange rates on Chinese monetary policy, allowing for a reduction in mortgage rates for existing properties to alleviate the repayment pressure on residents. It is important to establish a large-scale housing bank, collect and store surplus land inventory from local governments and unsold properties from developers for affordable housing, to meet the housing needs of new graduates and new urban residents. First-tier cities can relax restrictions on suburban areas and large-size properties to promote a soft landing in the real estate market. China has great economic potential, and as long as substantial and effective measures are taken, confidence will be greatly boosted, with confidence being more important than gold. In this way, our economy has great prospects. The economic and financial data for August show the following characteristics: 1) After the implementation of new policies in May, the real estate market experienced a pulse-like rebound in June and July, but since August, there has been a noticeable decline in real estate transactions, indicating limited effectiveness of the new policies. Real estate investment remains weak due to factors such as shrinking land supply and demand. In August, the year-on-year decrease in sales area and sales value of commercial housing was 12.6% and 17.2% respectively, narrowing by 2.8 and 1.3 percentage points from July; the sources of real estate development funds saw a year-on-year decrease of 10.6%, narrowing by 1.3 percentage points from July; real estate development investment fell by 10.2% year-on-year, narrowing by 0.6 percentage points from July; the prices of new residential housing in first, second, and third-tier cities fell by 0.3%, 0.7%, and 0.8% respectively compared to the previous month. The bottom of the real estate market depends on improvements in resident purchasing power and expectations. The expectation of a further reduction in mortgage rates for existing properties in the near future has reemerged; if realized, it would significantly reduce the burden on residents and boost market confidence. 2) Infrastructure investment has declined, but investment in water, electricity, and gas remains high. Infrastructure construction investment in August grew by 6.2% year-on-year, a decrease of 4.5 percentage points from July. In August, investment in water, electricity, and gas increased by 21.9% year-on-year, while investment in transportation and warehousing fell by 2.4% year-on-year, primarily due to a high base, but with a month-on-month increase. The issuance of special bonds has accelerated, with the volume of new special bond issuance in August approaching 800 billion yuan, setting a new high for monthly issuance this year. The proportion of new special bonds issued by some provinces continues to rise, which may be used to repay existing debt or alleviate local debt pressure, with the effects on turning infrastructure investment into physical output yet to be observed. 3) Manufacturing investment continues to grow at a fast pace, benefiting from the development of new productive forces and equipment upgrades, which is expected to continue supporting fixed asset investment. Manufacturing investment in August increased by 8.0% year-on-year, a decrease of 0.4 percentage points from July; among them, transportation equipment manufacturing, such as railways, increased by 34.1% year-on-year. Industrial enterprise profits cumulatively increased by 3.9% year-on-year from January to July, a 0.3 percentage point increase from January to June. Investment in equipment and tools increased by 16.8% year-on-year from January to August, contributing 64.2% to overall investment growth. 4) Consumption has slowed down, with differentiation in the growth of essential and optional consumer goods. Consumption is a function of wealth and expectations. With an increase in the unemployment rate, consumer confidence has decreased, with the urban survey unemployment rate for the 16-24 age group (excluding students) reaching 17.1% in July, an increase of 3.9 percentage points from the previous month. The consumer confidence index was 86.0 in July, the lowest since 2023. The combined pressures of unemployment and weak consumption are creating a negative loop. Overall, it is crucial to actively engage in economic efforts to address the challenges facing the economy and ensure sustainable and high-quality development.The employment situation for the workforce aged 16-24 (excluding students) is grim, with insufficient willingness to consume. In August, the total retail sales of consumer goods grew by 2.1% year-on-year, a decrease of 0.6 percentage points from the previous month; month-on-month, it was -0.01%, weaker than seasonal trends. Essential consumer goods maintained growth, while most optional consumer goods saw negative growth. The urban survey unemployment rate in August was 5.3%, and the urban survey unemployment rate in 31 major cities was 5.4%, both up by 0.1 percentage points from the previous month. In July, the urban survey unemployment rate for the workforce aged 16-24 (excluding students) was 17.1%, an increase of 3.9 percentage points from the previous month; for the age groups 25-29 and 30-59 (excluding students), the urban survey unemployment rates were 6.5% and 3.9% respectively, with changes of 0.1 and -0.1 percentage points from the previous month. The consumer confidence index in July was 86.0, a decrease of 0.2 from June, the lowest value since 2023.5) External demand has cooled off, but exports have picked up, mainly due to factors such as typhoons, grabbing exports, strong competitiveness of Chinese manufacturing, and low base numbers. In August, exports increased by 8.7% year-on-year (in US dollars), up 1.7 percentage points from the previous month; the two-year composite was -0.3%. Structurally, mechanical and electrical products remain the main support for exports; ships and automobiles continue to experience high growth; weak inventory replenishments in the United States and the revival of the real estate market are driving the export of household appliances. Exports to the EU and emerging economies are better than to developed countries. In the future, trade friction between the EU, the US, and China is likely to disrupt China's export pace, leading to possible grabs for exports in the current period and overspending of demand later on. 6) Credit and social financing demand are weak, with M1 growth hitting historic lows for five consecutive months, and the real economy showing a lack of vitality. In August, existing social financing increased by 8.1% year-on-year, down 0.1 percentage point from the previous month; new social financing amounted to 3,029.8 billion yuan, an increase of 98.1 billion yuan year-on-year. Structurally, government bonds are the main support. Net financing of government bonds increased by 1,613 billion yuan year-on-year, up 437.1 billion yuan from the previous month. M2 growth was 6.3% year-on-year, unchanged from the previous month; M1 growth was -7.3% year-on-year, hitting a historic low again, down 0.7 percentage points from the previous month; the M2-M1 gap widened further to 13.6%, reaching it highest value this year. 7) The core CPI and PPI fell in August. The CPI rose slightly, mainly due to hot and rainy weather pushing up vegetable and fruit prices, and a slight increase in pork prices; durable goods prices continued to decline; influenced by the real estate market, rental prices are trending downward. The core CPI fell from 0.3% month-on-month to -0.2%; year-on-year it was 0.3%, down 0.1 percentage points from the previous month. The CPI was 0.6% year-on-year; month-on-month it was 0.4%, down 0.1 percentage points from the previous month. The PPI fell by 1.8% year-on-year, with the decline widening by 1.0 percentage points from the previous month; the month-on-month change was -0.7%, with the decline expanding by 0.5 percentage points from the previous month. Without strong policy support, it would be difficult for the core CPI to see substantial increases this year, and reaching zero for the PPI would still be challenging. Industrial production continues to decline, service industry production falls, high-tech industries grow rapidly Since April, industrial production growth has continued to decline. In August, the year-on-year growth of industrial value added above the designated size was 4.5%, down 0.6 percentage points from the previous month; month-on-month it was 0.3%, weaker than seasonal expectations. In August, the year-on-year growth rate of export delivery value was 6.4%, unchanged from the previous month; the production-sales ratio was 96.6%, down 0.6 percentage points from the previous month. Among the three major categories, electricity, heat, gas, and water production grew faster than mining and manufacturing. The year-on-year growth rates of value added in the mining, manufacturing, and electricity, heat, gas, and water production industries were 3.7%, 4.3%, and 6.8%, respectively, with changes of -0.9, -1.0, and 2.8 percentage points from the previous month. 1) High-tech manufacturing industries grew rapidly. In August, the year-on-year growth of industrial value added in high-tech industries was 8.6%, down 1.4 percentage points from the previous month. Among them, the year-on-year growth rates of the manufacturing of computers, communications, and other electronic equipment, as well as railway, ship, aerospace, and other transportation equipment manufacturing were 11.3% and 12.0%, respectively, down 3.0 and 0.7 percentage points from the previous month. The year-on-year growth rate of automobile manufacturing was 4.5%, up 0.1 percentage points from the previous month. 2) Non-metallic mineral products industry and black metal smelting and rolling processing industry experienced negative growth due to the impact of the real estate sector. In August, the year-on-year growth rates of non-metallic mineral products and black metal smelting and rolling processing industries were -5.5% and -2.1%, respectively, with declines of -2.6 and -0.6 percentage points from the previous month. 3) Production in the food industry declined. In August, the year-on-year growth rates of agricultural and sideline food processing industry and food manufacturing industry were -0.1% and 6.9%, respectively, with declines of -0.3 and -0.2 percentage points from the previous month. 4) The service industry production index was 4.6% year-on-year, down 0.2 percentage points from the previous month. Among them, the information transmission, software, and information technology services industry as well as the rental and business services industry saw slight increases, with year-on-year growth rates of 12.1% and 9.4%, respectively, down by -0.5 and 0.4 percentage points from the previous month. Fixed asset investment stabilizes, high-tech industry growth remains stronger than overall In August, fixed asset investment (excluding rural households) increased by 2.0% year-on-year, up 0.2 percentage points from July. Looking at investment entities, private fixed asset investment and state-owned holding enterprise fixed asset investment for January to August accumulated year-on-year growth rates of -0.2% and 6.0%, respectively, down by -0.2 and 0.3 percentage points from July; private investment excluding real estate development grew by 6.3%. Investment in high-tech manufacturing industries remains faster than overall fixed investment. For January to August, high-tech industry investment increased by 10.2% year-on-year, with high-tech manufacturing and high-tech service industry investments increasing by 9.6% and 11.7% respectively. Amid the new round of technological revolution and industrial transformation, emerging industries continue to grow rapidly, with investments in aerospace, spacecraft, and equipment manufacturing as well as electronic and communication equipment manufacturing growing by 34.4% and 10.0% in January to August. The pulse of the real estate market continues to decline In August, the year-on-year decrease in sales area and sales amount of commercial housing were -12.6% and -17.2% respectively, narrowing by 2.8 and 1.3 percentage points from July. After the policies introduced in May, the real estate market experienced a short-term resurgence in June and July, but since August there has been a significant decline in real estate transactions, with limited effects from the new policies. In August, the month-on-month changes in sales prices of new residential buildings in first-, second-, and third-tier cities were -0.3%, -0.7%, and -0.8% respectively, with Shanghai seeing a 0.6% increase; the month-on-month changes in prices of second-hand residential buildings in first-, second-, and third-tier cities were -0.9%, -1.0%, and -0.9%. Housing demand continues to be limited by residents' expectations regarding future income, employment, and prospects. The growth rate of domestic loans received by real estate companies continues to narrow, mainly due to the high growth rate of domestic loans being constrained by overall sales receipts. In August, the year-on-year change in sources of funds for real estate development was -10.6%, narrowing by 1.3 percentage points from July. In August, real estate companies received domestic loans, self-raised funds, deposits and prepayments, and personal mortgage loans that amounted to 7.4%, -6.2%, -15.7%, and -21.8% year-on-year respectively, with changes of 11.2, 0.1, -2.8, and 12.2 percentage points from July. In January, the China Banking and Insurance Regulatory Commission and the Ministry of Housing and Urban-Rural Development jointly issued a document entitled "On the"Notice on Establishing a Coordinated Mechanism for Real Estate Financing in Cities, mandated in June that commercial banks should lend as much as possible to projects on the "white list" that meet the requirements. By late August, commercial banks had already approved over 5300 projects on the "white list" according to the approval process, with approved loan amounts totaling nearly 1.4 trillion yuan. As funds are gradually disbursed according to project progress, the situation for domestic loan funds for real estate enterprises has improved.Affected by factors such as shrinking land supply and demand, real estate investment is still sluggish. In August, real estate investment decreased by 10.2% year-on-year, narrowing the decline by 0.6 percentage points compared to July. According to data from China Index Academy, in August, the supply area of construction land in 300 cities decreased by 29.0% year-on-year, the transaction area decreased by 31% year-on-year, and the total land transfer fees decreased by 53% year-on-year. Central enterprises and state-owned enterprises are still the main players in land acquisition. The new construction and completion areas in August decreased by 16.7% and 36.6% year-on-year, respectively, narrowing the decline by 3.0 and expanding by 14.8 percentage points compared to July. The real estate development prosperity index in August was 92.35, an increase of 0.15 percentage points from the previous month. Real estate is China's largest pillar industry, and if the real estate market is stable, the economy, employment, and finance will also be stable. The bottom of the real estate market still relies on improving residents' purchasing power and expectations to boost confidence. Since 2024, the spread between existing and new housing loans continues to widen, leading to an increase in residents prepaying or being forced to terminate their loans, prompting calls for a reduction in existing housing loan interest rates. Expectations of a reduction in existing housing loan rates have resurfaced recently, and if existing housing loan rates can be lowered, it will greatly reduce the burden on residents and boost market confidence. Infrastructure investment growth slows down, water, electricity, and gas maintain high growth In August, infrastructure construction investment grew by 6.2% year-on-year, a decrease of 4.5 percentage points from July. In August, infrastructure construction investment (excluding water, electricity, and gas) increased by 1.2% year-on-year, a decrease of 0.8 percentage points from July. 1) Investment in water, electricity, and gas production and supply maintained high growth. In August, investment in water, electricity, and gas increased by 21.9% year-on-year, an increase of 0.8 percentage points from July. The State Grid's investment has accelerated, raising the annual budget for grid construction investment from the initial 560 billion yuan to over 600 billion yuan in July. High profits drive high investment. The cumulative year-on-year profits in the water, electricity, and gas industry from 2022 to July 2024 were 41.8%, 54.7%, and 20.1%, respectively. 2) Investment growth in transportation and warehousing slows down due to a high base, but month-on-month growth is positive. In August, transportation and warehousing investment decreased by 2.4% year-on-year, a decrease of 19.0 percentage points from July. In August, railway transportation and road transportation investments increased by 8.1% and -7.6% year-on-year, respectively, with positive month-on-month growth. 3) The water management industry has performed well, but the decline in public facilities management investment has dragged down the overall water, environment, and public facilities industry. In August, investments in water, environment, and public facilities management increased by 4.6% year-on-year, an increase of 3.9 percentage points from July. Water management industry investment increased by 66.9% year-on-year, while public facilities management investment decreased by 4.7% year-on-year. Special bond funds continued to flow in to drive the strong performance of the water management industry. As of July, the 1 trillion yuan worth of special bonds issued in 2023 had been allocated to 15,000 projects, focusing on post-disaster reconstruction and disaster prevention projects, all of which had commenced construction. By July 24th, this year's 1 trillion yuan worth of long-term special bonds had issued 418 billion yuan, supporting the implementation of major national strategies and key areas of security capacity building. On the funding side, the issuance of special bonds has accelerated, and the participation of "special" new special bonds may help alleviate the pressure of local debt. The issuance of new special bonds at the local level has accelerated, with a total of around 12 trillion yuan issued in August, of which the scale of new special bonds issued is close to 800 billion yuan, setting a new monthly issuance record for the year. The proportion of undisclosed "special" new special bonds used to repay existing debts to ease the pressure of localized debt is increasing, and it is expected that the progress of special bonds issuance will continue to accelerate. On the project side, major project construction in many provinces and cities is accelerating. Many places have explicitly stated the need to increase the maturity of projects to ensure that physical work is completed as soon as funds are allocated, giving priority to supporting projects with high maturity. Investments in projects with planned total investment of over 100 million yuan increased by 7.0% year-on-year from January to August. Manufacturing investment continues to maintain rapid growth, benefitting from the development of new quality production forces and equipment updates In August, manufacturing investment increased by 8.0% year-on-year, a decrease of 0.4 percentage points from July. Under the impetus of policies promoting the transformation and upgrading of the manufacturing industry and large-scale equipment renovation, the support of high-tech investments in manufacturing for fixed investments can still be expected in the future. From January to August, investment in consumer goods manufacturing increased by 14.9%, equipment manufacturing by 10.0%, and raw material manufacturing by 9.0%. 1) Industries related to new quality production forces show strong growth. In August, investments in transportation equipment manufacturing such as railways and computer, communication, and other electronic equipment manufacturing increased by 34.1% and 12.4% year-on-year, respectively, maintaining double-digit growth. The government work report in 2024 mentioned the need to "vigorously promote the construction of a modern industrial system and accelerate the development of new quality production forces." The decision on further comprehensive deepening reform and promoting China's modernization issued by the Central Committee on July 21, 2024, proposed to "improve the institutional mechanisms for the development of new quality production forces tailored to local conditions." Cultivating ShenZhen New Industries Biomedical Engineering is a key task, and the development of strategic emerging industries and future industries is crucial. The relevant manufacturing industries will continue to grow rapidly. 2) Equipment renewal policies continue to be implemented, and various equipment manufacturing industries are expected to maintain high growth rates. In August, investments in general equipment and special equipment manufacturing increased by 13.8% and 9.9% year-on-year, respectively, higher than the overall manufacturing growth rate. In March 2024, the State Council issued the "Action Plan to Promote Large-Scale Equipment Renewal and the Exchange of Consumer Goods for Old Ones." In April, the Ministry of Industry and Information Technology and seven other departments jointly issued the "Implementation Plan to Promote Equipment Renewal in the Industry," proposing that the investment scale in the industrial field increase by more than 25% by 2027 compared to 2023. On July 25th, the National Development and Reform Commission and the Ministry of Finance jointly issued "Several Measures for Strongly Supporting Large-Scale Equipment Renewal and the Exchange of Consumer Goods for Old Ones," coordinating the allocation of around 300 billion yuan of long-term special bonds, with around 150 billion yuan each for equipment renewal and the exchange of consumer goods for old ones. Under the drive of the large-scale equipment renewal policy, equipment and tool purchase investments from January to August increased by 16.8% year-on-year, contributing 64.2% to the overall investment growth. Consumer spending declined, with a differentiation between necessity and discretionary items Consumer spending fell, with a month-on-monthWeaker than seasonal. In August, the total retail sales of consumer goods increased by 2.1% year-on-year, a decrease of 0.6 percentage points from the previous month; a decrease of 0.01% from the previous month, weaker than seasonal.Product retail declined, while service retail repair slowed. In August, the year-on-year growth rates of product retail and catering revenue were 1.9% and 3.3% respectively, with changes of -0.8 and 0.3 percentage points from the previous month. From January to August 2024, the year-on-year growth rate of service retail cumulatively was 6.9%, a decrease of 0.3 percentage points from the previous month. Looking at different industries, there is a differentiation between necessities and optional consumer goods. Necessities maintained growth, while most optional consumer goods had negative growth. Car consumption saw an expanded decline, and post-cycle consumption in real estate continued to be a drag. Consumption of oil and related products shifted from positive to negative. 1) Necessities maintained slight growth, with year-on-year growth rates of grains and oils, food, beverages, tobacco and daily supplies at 10.1%, 2.7%, 3.1%, and 1.3% respectively, with changes of 0.2, -3.4, 3.2, and -0.8 percentage points from the previous month. 2) Most optional consumer goods had negative growth; travel and entertainment declined as summer holidays approached their end. In August, year-on-year consumption of clothing, footwear and textiles, cosmetics, and jewelry decreased by 1.6%, 6.1%, and 12.0% respectively, with changes of 3.6, 0, and -1.6 percentage points from the previous month; sports and recreational goods consumption decreased by 3.2%, a drop of 7.5 percentage points from the previous month. 3) The decline in car consumption expanded, related to weak consumer willingness. In August, car consumption decreased by -7.3% year-on-year, a decline of 2.4 percentage points from the previous month. 4) Negative growth in consumption of oil and related products was mainly due to declining oil prices. In August, the year-on-year consumption of oil and related products was -0.4%, a decrease of 2.0 percentage points from the previous month. 5) Post-cycle consumption in real estate continued to see negative growth. In August, year-on-year growth rates of household appliances, audio and video equipment, furniture, and construction and decoration materials were 3.4%, -3.7%, -6.7% respectively, with changes of 5.8, -2.6, -4.6 percentage points from the previous month. The increase in unemployment, particularly among labor forces aged 16-24 (excluding students), has led to a severe employment situation, with inadequate consumer confidence in the household sector. In August, urban surveyed unemployment rates and urban surveyed unemployment rates in 31 major cities were 5.3% and 5.4% respectively, an increase of 0.1 percentage points from the previous month. In July, the urban surveyed unemployment rate among the labor force aged 16-24 (excluding students) was 17.1%, an increase of 3.9 percentage points from the previous month; for the age groups 25-29 and 30-59 (excluding students), urban surveyed unemployment rates were 6.5% and 3.9%, with changes of 0.1 and -0.1 percentage points from the previous month. The consumer confidence index in July was 86.0, a decrease of 0.2 from June, representing the lowest value since 2023. Exports have rebounded, mainly due to factors such as typhoons impacting exports, "export grabbing", with uncertainties in future external demand. In August, exports increased by 8.7% year-on-year (measured in USD), an increase of 1.7 percentage points from the previous month, mainly due to factors such as typhoons, "export grabbing", strong competitiveness of Chinese manufacturing, American inventory replenishment, and the revitalization of supply chains. The two-year compound growth rate of exports in August was -0.3%, an increase of 3.9 percentage points from the previous month, marking the fourth consecutive month of decline. After the bottoming out of durable goods inventories of wholesalers in the United States in November 2023, a trend of slight replenishment appeared; exports to Vietnam and South Korea increased by 16.1% and 11.4% respectively. However, there has been a slowdown in external demand, with substantial uncertainties remaining in the global economy. While the U.S. economy shows resilience, there is a marginal slowdown, and the replenishment cycle may be weak, exacerbated by escalating geopolitical conflicts and rising protectionism and unilateralism. The global Purchasing Managers' Index (PMI) has contracted for two consecutive months in August, it was 49.5, with new orders at 48.8, both below the threshold of economic expansion. Mechanical and electrical products remain the main support for exports, driving 6.9 percentage points of export growth; shipbuilding and automotive sectors continue to see high growth; a weak replenishment cycle for U.S. inventories and a market revival in real estate have driven exports of household electrical products. Mechanical and electrical products accounted for 60.7% of the export value, with a year-on-year growth of 11.9% and a two-year compound growth of 1.9%. Among them, automatic data processing equipment and its components and integrated circuits saw year-on-year growth rates of 10.8% and 18.2% respectively; ship exports increased by 60.6%; automotive exports, including chassis, rose by 32.7%; household electrical appliance exports by 12.0%, with a two-year compound growth rate of 11.7%. Exports of the top eight labor-intensive products decreased by -2.1% year-on-year, but increased by 2.5% compared to the previous month. Among them, labor-intensive products such as clothing, footwear, bags, toys, and furniture saw year-on-year declines of 2.7%, 5.5%, 10.6%, 8.3%, and 4.5% respectively. High-tech product exports increased by 9.1% year-on-year and fell by -2.7% on a two-year compound basis. Economic differentiation is visible, with emerging economies performing better than developed economies, yet with a declining growth momentum. In August, export amounts to the U.S. and Europe exceeded those to ASEAN, with year-on-year growth rates of 4.9%, 13.4%, 9.0% respectively, changes of -3.2, 5.4, and -3.2 percentage points from the previous month; on a month-on-month basis, the rates were 3.3%, 2.3%, and -0.5%; exports to Russia, Brazil, and India saw year-on-year growth rates of 10.4%, 42.8%, 14.0% respectively, changes of 13.2, 18.3, and 5.4 percentage points from the previous month; on a month-on-month basis, the rates were 2.7%, 22.2%, and 3.7%. Imports have declined, indicating a lack of domestic demand. In August, imports decreased by 0.5% year-on-year, a decrease of 6.7 percentage points from the previous month, with a two-year compound growth rate of 7.2%. Looking at countries, imports from ASEAN, Japan, and South Korea decreased by 5.0%, -1.3%, and 12.2% respectively, while imports from Vietnam increased by 6.6%; imports from the European Union and the U.S. decreased by -5.3% and 12.2% respectively, a decrease of 12.4 and 11.9 percentage points from the previous month. Among major commodities, imports of crude oil, iron ore, copper, steel, and coal decreased by -4.2%, -9.4%, -1.7%, -17.1%, and 7.3% respectively, while import quantities decreased by -7.0%, -4.7%, -12.3%, -20.5%, and 3.4% respectively. High-tech and mechanical products imports increased by 13.0% and 8.6% respectively, with integrated circuits growing by 11.2%; automotive imports decreased by -0.9% year-on-year, a significant drop of 16.4 percentage points from the previous month. M1 growth has hit a historical low for the fifth consecutive month, indicating lackluster economic activity. In August, the stock of social financing grew by 8.1% year-on-year, a decrease of 0.1 percentage points from the previous month. The newly added social financing amounted to 3029.8 billion yuan, an increase of 98.1 billion yuan year-on-year. Structurally, government bonds are the main support for social financing.Support. 1) Decrease in on-balance sheet credit. The newly added RMB loans in social financing totaled 104.41 billion yuan, a decrease of 29.71 billion yuan compared to the same period last year. 2) Decrease in off-balance sheet financing. Off-balance sheet financing increased by 116.1 billion yuan in August, an increase of 15.6 billion yuan compared to the same period last year. 3) Increase in government bonds. Net financing for government bonds increased by 161.3 billion yuan in August, an increase of 43.71 billion yuan compared to the same period last year. 4) Direct financing increased by 182.3 billion yuan, a decrease of 200.1 billion yuan compared to the same period last year.Credit growth slows, with weak financing demand from enterprises and residents. As of August, the year-on-year growth rate of credit balance for financial institutions was 8.5%, a decrease of 0.2 percentage points from the previous month. New RMB loans amounted to 900 billion yuan, a decrease of 460 billion yuan compared to the same period last year. New corporate loans totaled 840 billion yuan, down by 108.8 billion yuan year-on-year; new household loans reached 190 billion yuan, a decrease of 202.2 billion yuan year-on-year. M2 growth remains stable, while M1 growth hits a historical low for the fifth consecutive month, leading to a widening gap between M2 and M1. In August, M2's year-on-year growth rate was 6.3%, unchanged from the previous month; M1's year-on-year growth rate was -7.3%, also hitting a new low and decreasing by 0.7 percentage points from the previous month; the gap between M2 and M1 further expanded to 13.6%, the highest value of the year. Corporate deposits increased by 350 billion yuan, a decrease of 539 billion yuan year-on-year; household deposits increased by 710 billion yuan, down by 77 billion yuan year-on-year. Localized abnormal weather conditions drove up the CPI, while declining commodity prices led to a decrease in the PPI. In August, prices continued to decline, reflecting insufficient domestic demand. The core CPI decreased from 0.3% to -0.2% month-on-month; although the CPI slightly increased, it was mainly due to food price increases caused by abnormal weather conditions; the decline in PPI further widened. Since 2023, overall prices have been low, with CPI hovering around 0 year-on-year and PPI experiencing negative growth for 23 months. Specifically, food prices increased significantly, driven by high temperatures and localized heavy rainfall, pushing up prices of vegetables and fruits, with a slight increase in pork prices. In August, food prices rose by 3.4% month-on-month, an increase of 2.2 percentage points from the previous month; food prices went up from 0% to 2.8% year-on-year. Fresh vegetables, pork, aquatic products, eggs, and fresh fruits in August rose by 18.1%, 7.3%, 0.2%, 2.8%, and 3.8% month-on-month, respectively, with changes of 8.8, 5.3, -0.2, -0.9, and 4.1 percentage points from the previous month. Non-food prices turned negative month-on-month due to declining international crude oil prices and reduced travel demand; durable goods prices continued to fall; influenced by the real estate sector, rental prices trended downward. In August, non-food prices decreased from 0.4% to -0.3%. Prices of household appliances, transportation equipment, and communication equipment fell by -0.7%, -0.3%, and -0.8% month-on-month, with changes of -1.1, 0.3, and -0.7 percentage points from the previous month; fuel prices for transportation equipment dropped by 2.9%. Rental prices decreased by -0.3% year-on-year. Pork prices saw an increasing month-on-month change, entering an upward phase of the "pork cycle," with limited space for this round of increase. In August, pork prices rose by 16.1% year-on-year, a decrease of 4.3 percentage points from the previous month; month-on-month, pork prices increased by 7.3%, up by 5.3 percentage points from the previous month. As of September 6, 2024, the average wholesale price of pork was 27.36 yuan/kg. After reaching a near-balance point in production capacity, the market showed a fluctuating trend, with a slowdown in liquidation speed, an increase in the feed-to-pork ratio; industry concentration has increased, and the price fluctuations in this new round of the pork cycle may be smaller than in the traditional pork cycle. The decline in PPI year-on-year widened, driven by insufficient industrial demand and falling commodity prices; prices across industrial chains such as crude oil, steel, coal, and non-ferrous metals generally decreased, while prices in the consumer goods manufacturing industry declined, with a differentiated rise and fall in high-tech industries. In August, PPI fell by 1.8% year-on-year, an increase of 1.0 percentage points from the previous month; month-on-month, PPI was -0.7%, an increase of 0.5 percentage points from the previous month. Prices of aircraft manufacturing increased by 2.1%, prices of industrial Siasun Robot & Automation manufacturing increased by 0.8%, and prices of computer manufacture increased by 0.4%; computer, communications, and other electronic equipment manufacturing and automobile manufacturing decreased by 0.2% month-on-month. PMI has remained below the boom-bust line for four consecutive months. In August, the manufacturing PMI continued to decline, weaker than seasonal trends, with insufficient domestic demand being the main issue. Production fell below the boom-bust line, while new orders and new export orders continued to shrink; real estate sales remained weak, and a significant decline in factory prices suppressed business profits, leading to difficulties for small and medium-sized enterprises. Production and demand both fell into the contraction zone. The production index and the new order index were 49.8% and 48.9% respectively, down by 0.3 and 0.4 percentage points from the previous month. Exports continued to show resilience, with new export orders at 48.7%, up by 0.2 percentage points from the previous month. The main raw material purchase price index and the factory price index were 43.2% and 42.0%, respectively, a significant decrease of 6.7 and 4.3 percentage points from the previous month. The gap between the factory price index and the raw material price index narrowed slightly, easing cost pressures, but insufficient demand continued to drag down factory prices, keeping downstream industries under profit pressure. Large enterprises maintained an expansion trend, while small and medium-sized enterprises remained below the boom-bust line, highlighting issues such as insufficient demand and the need to stabilize the recovery of small and medium-sized enterprises. The PMI for large, medium, and small enterprises was 50.4%, 48.7%, and 46.4% respectively, with declines of 0.1, 0.7, and 0.3 percentage points from the previous month. Construction activity slowed down, while the service industry remained relatively strong. The business activity index for the construction industry was 50.6%, down by 0.6 percentage points from the previous month, mainly due to a slow pace of special bond issuance and construction progress being affected by high temperatures and heavy rainfall. The business activity index for the service industry was 50.2%, up by 0.2 percentage points from the previous month, but weaker than seasonal trends, with a slowing pace of consumption recovery. This article was originally published by "Zepin Macro" and written by Ren Zeping; Translation by GMTEight, Edited by Liu Jiayin.