Greater China-110411882

1Haibin Zhu (852) 2800-7039haibin.zhu@jpmorgan.comJPMorgan Chase Bank, N.A., Hong Kong BranchGrace Ng (852) 2800-7002grace.h.ng@jpmorgan.comTingting Ge (852) 2800-0143tingting.ge@jpmorgan.comAsia Pacific Economic Research21 September 2024J P M O R G A Ngovernment tax revenue – seem increasingly worrying. Over-all, August data appear to still support our below-trend 3Q growth forecast of 3.0% q/q saar.-30-20-100102030401112131415161718192021222324Source: NBS, J.P. MorganFigure 2: FAI growth by industry%oya, 3mmaManufacturingReal estateInfrastructurePresident Xi last week stressed that government officials should strive to (a tone-down from “must” previously) achieve the 2024 annual growth target (around 5%, and com-pared to our forecast of 4.6%) and to ensure solid growth toward the end of 3Q and 4Q. In our view, to achieve this tar-get, the government needs to strengthen countercyclical mea-sures (fiscal, monetary and housing) and shift to balanced support between consumption and investment, between ser-vice and manufacturing sectors, to steer the economy onto a sustained recovery path. For instance, to support consump-tion, the government could take measures to boost household income growth, revive the service sector, stabilize the housing market, and lower household savings rates.Such a policy pivot is not in our baseline assumption yet. But a few potential catalysts and timelines are worth monitoring: (1) if September/October macro data suggest that the econo-my’s weak links (housing and consumption) turn even weaker and fiscal revenue continues to contract; (2) Politburo meet-ing and annual Central Economic Work Conference by late November/early December; and (3) U.S. tariff policy after the upcoming elections.Most housing figures worsened againThe NBS 70 cities’ new home prices were down 5.7%oya or 0.7%m/m nsa in August (-5.3%oya or -0.6%m/m nsa in July), and secondary home prices were down 8.6%oya or 0.9%m/m nsa (vs. -8.2%oya or -0.8%m/m nsa in July). With that, new home prices declined 8.4% compared to the 2021 peak as of August, and secondary home prices dropped 14.7% (Figure 3). As in other asset markets, demand is unlikely to recover meaningfully until the market believes prices have bottomed or even overshot in their adjustment.With continued cash flow pressure and a low incentive to pur-chase land and start new projects, real estate FAI continues to •China: August activity data reinforce soft tone on domestic demand•Most housing figures worsened again as time inconsis-tency issues linger•Hong Kong SAR: CPI ticked up another 0.3%m/m sa•Taiwan: CBC on hold for policy rate, but hiked RRR again and tightened credit to cool housing boom•Next week: China MLF operation, Hong Kong trade, Taiwan export orders and IPChina’s August activity data do not show signs of improve-ment in domestic demand conditions. The weak links in the economy remain, and the concern is that a few solidly per-forming sectors seem to be losing momentum. First, housing