China's economic expansion has strayed further below Beijing's annual target, according to Goldman Sachs Group Inc., and that is boosting expectations for monetary policy changes.
Reports on July economic activity indicated that "the weakness is demand-driven," Hui said. Industrial production, consumer spending and capital investment all missed expectations, according to official data showing a deepening slowdown.
"July's growth deceleration is more concerning than April's because it came from a lower starting point and impacted areas that had previously looked resilient," Hui said.
Goldman's assessment ranks among the most pessimistic from global banks in the days following the July data release.
Macquarie Group has estimated monthly GDP expansion of about 4.2% in July, while BNP Paribas SA puts the figure at 4.1%. That is roughly 0.2 percentage point below the pace needed in the second half to achieve the full-year official target.
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Those numbers underline the scale of the challenge. That means the next two months would need to be considerably stronger just to pull the average back toward the official range.
BNP Paribas economists led by Jacqueline Rong highlighted what could move policy. "If GDP growth continues to hover at or even below 4% in August and September even with greater fiscal efforts, it will put the fulfillment of the annual growth target at risk," they said. "In that event, we expect policymakers to introduce fresh stimulus in late September or early October."
That puts the next two months of data in motion.
Higher oil prices had lifted factory-gate inflation, prompting many economists to temper their earlier forecasts for interest-rate easing before the latest slowdown emerged. According to the latest Bloomberg poll in July, the typical analyst expects the People's Bank of China to maintain its policy rate through next year.
The PBOC has avoided adjusting either its benchmark rate or its reserve requirement ratio for over a year, last acting near the peak of the U.S.-China trade conflict. That reluctance has left the central bank with limited room to respond if conditions worsen, even as the economy's growth engines show signs of fatigue.
Pressure on policymakers is rising to step up support. So far top officials have taken only incremental steps and shown little urgency.
On Aug. 17, at a session of China's cabinet, Premier Li Qiang urged government agencies to strengthen supportive measures.
Market sentiment has begun to shift. "Our conversations with traders and investors suggest that market expectations of monetary policy easing increased somewhat," Hui said.
All of this leaves investors watching to see whether Beijing responds with more forceful stimulus in the coming weeks. If growth remains at or below 4%, the pressure on policymakers to act will continue to build.
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