〔Overnight Brief〕Old-New Divergence Widens: July IP Slows to 4.5%, YTD Investment Drop Deepens to 6.7% and Tier-1 Housing Outperforms – State Council Targets Annual Goals via Future Industries

1. Data Pulse

The July activity release framed the overnight session for China assets: industrial value-added growth slowed to 4.5% y/y ^[1], January-July fixed-asset investment contracted 6.7% y/y with a widening divergence between new and old drivers ^[2], and the urban surveyed unemployment rate held at 5.2% ^[3]. Manufacturing investment accounted for 26.6% of total investment over January-July ^[4]. The National Bureau of Statistics said the July economy displayed 'vitality' ^[5], yet after removing seasonal factors, industrial output rose only slightly on a month-on-month basis ^[1].

2. Property: A Tier-1 Repair

Tier-1 second-hand home prices rose 0.2% m/m in July, the fifth straight monthly increase, while new home prices were flat ^[6]. Shanghai, Guangzhou and Shenzhen new-home prices posted a fifth consecutive monthly gain ^[7]. The repair, however, did not spread further to second-tier cities ^[7].

3. Policy Response

Premier Li Qiang chaired the State Council's 12th plenary session on Aug 17, stressing implementation of central decisions and efforts to complete annual economic and social development goals ^[8][9]. He called for stabilizing external demand, expanding win-win international trade cooperation, promoting balanced trade development, and strengthening technology empowerment to accelerate the shift between old and new growth drivers ^[10]. He also emphasized increasing support for cultivating emerging pillar and future industries, continuing to transform and upgrade traditional industries, and consolidating the real economy ^[10]. The National Development and Reform Commission (NDRC) is accelerating the deployment of 2026 new-policy financial instruments and increasing support for private investment projects ^[8]. Eight government departments jointly issued a notice to safeguard agricultural irrigation water safety, including strengthening risk prevention for industrial and livestock wastewater ^[11][12].

4. Energy and Geopolitics

The '15th Five-Year Plan' for oil and gas development set a 2030 target of 440 million tonnes of oil equivalent in domestic oil and gas supply, 20,000 km of new long-distance pipelines, and natural gas storage above 13% of national consumption ^[6][13]. July crude oil output from above-scale industrial enterprises rose 0.8% y/y ^[14]. President Donald Trump threatened to bomb Oman if it obstructed US efforts to reopen the Strait of Hormuz, while Iranian Revolutionary Guard officials said the Strait would reopen if the US honors its commitments ^[8].

5. Flows and Market Signals

US Treasury data showed Japan, the UK and China all trimmed their Treasury holdings in June: Japan fell $26.4 billion to $1.117 trillion, the UK fell $8.7 billion to $939.9 billion, and China fell $26.0 billion to $633.4 billion ^[15]. In China's equity market, southbound Stock Connect flows saw net buying of HK$3.077 billion, with SMIC, Zhipu and Tencent Holdings the top net buys ^[8]. On the 'dragon-tiger' institutional list, institutions appeared in 35 stocks with 16 net buys and 19 net sells, led by Xingsen Technology, Tongfu Microelectronics and Suzhou Tianmai ^[8]. Unitree Robotics is due to list on the STAR Market on Aug 19 ^[8][6]. The European Central Bank (ECB) warned in a blog that US tech stocks, buoyed by excessive AI optimism, had been pushed to valuations above historical averages and could face an adjustment ^[6], while LME copper approached its record high in Monday's Asian session on historically extreme supply competition ^[6].