Editor's note: Li Lun, a special commentator for CGTN, is an assistant professor of economics at Peking University. The article reflects the author's opinions and not necessarily the views of CGTN.

China's July economic data present a picture of overall stability with differentiated sectoral performance. Industrial production and foreign trade continued to expand, modern services maintained relatively rapid growth, and employment and consumer prices remained generally stable. At the same time, retail sales grew modestly, fixed-asset investment declined, and the property sector remained under pressure. The more consequential message is that beneath this overall stability, the composition of production, investment, and demand continues to undergo structural rebalancing.

Industrial production remains one of the main sources of growth. Value added by major industrial enterprises rose 4.5% year-on-year in July and 5.3% during the first seven months. Equipment manufacturing expanded 9.7% and high-tech manufacturing 13.8% from January to July, considerably faster than industrial output as a whole. Output of 3D-printing equipment, lithium-ion batteries and industrial robots increased by 52.3%, 40.2% and 28.5%, respectively.

These figures suggest that industrial upgrading is increasingly taking place within the supply chain. Many of the fastest-growing products are not final consumer goods, but machinery, components and production equipment used by other firms. Their expansion can support automation, reduce production costs and improve efficiency across a much wider range of industries. The data therefore point to a deepening of China's advanced manufacturing system, not the growth of individual emerging products.

A similar pattern can be seen in services. The service production index increased 4.7% in the first seven months. Information transmission, software and information technology services grew 10.6%, while leasing and business services expanded 9.5%. These sectors provide digital, logistical and professional inputs to the rest of the economy. Their robust growth indicates that structural upgrading is occurring not only in factories, but also in the service activities that support modern production and commerce.

Investment continues to show comparatively softer momentum. Fixed-asset investment declined 6.7% from January to July, while investment excluding real estate fell 3.7%.Property development investment dropped 19.2% manufacturing investment declined 1.7% and private investment fell 9.4%. These figures point to a continued adjustment in investment patterns, with differing degrees of pressure across sectors and a more cautious allocation of capital amid evolving economic conditions.

At the same time, a closer look at the composition of investment suggests that this overall softness is accompanied by a gradual rebalancing within capital formation. While construction and installation investment declined by 9.2%, spending on equipment and instruments rose by 9.0%, and investment in intellectual-property products – including software, databases, and research and development – grew by 9.1%. High-tech industry investment also expanded by 5.0%, with particularly strong gains in information services, aerospace manufacturing, and electronic and communications equipment. Taken together, these shifts indicate that capital formation is gradually moving away from traditional construction-led expansion toward more technology-intensive and knowledge-based forms of investment.

Consumption growth remained subdued in July, with limited momentum across most categories. Retail sales increased 0.6% year-on-year in July and 1.2% in the first seven months, indicating only a modest recovery in household spending. A more comprehensive indicator that includes both retail sales and service retail sales of goods rose 2.6%, while service retail sales alone increased 5.0%, which suggests that consumption strength is increasingly concentrated in services rather than physical goods. Within goods categories, communications-equipment sales rose 15.1% and online service-related consumption increased 5.2%, highlighting pockets of stronger demand in technology-linked spending. Overall, the data indicate that while consumption is not contracting, its recovery remains uneven and is driven more by services and digital consumption than by traditional retail goods.

Foreign trade continued to perform strongly. Total goods trade increased 17.3% from January to July, with exports up 14.0% and imports up 22.0%. Exports of machinery and electrical products grew 21.2% and accounted for 63.8% of total exports. This composition is consistent with the industrial data and shows that China's external competitiveness increasingly rests on machinery, equipment and technologically more sophisticated manufactured products. Faster import growth also shows that China remains an important source of demand for global producers.

Overall, the July data point to an economy stabilizing through a shift in its underlying growth engines. High-tech manufacturing, equipment production, and digitally enabled services remain the most dynamic contributors, alongside continued strength in machinery exports, indicating that industrial upgrading and external competitiveness are reinforcing each other. Domestic demand is also showing gradual improvement, supported by policy measures, stabilizing employment, and the slow diffusion of productivity gains into household income and business confidence. While the adjustment is still ongoing, the pattern suggests that supply-side upgrading and internal circulation are moving in a more coordinated direction, laying the groundwork for a more balanced expansion over time.

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