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Business investment plunging, money supply soaring

Revised data show a slump in business investment in Q2 and we believe that capital spending won’t recover until next year. By contrast, the money supply is going from strength to strength. With around half the fiscal support scheduled for the current fiscal year yet to spent, money supply growth should remain strong over the coming months. While we still expect inflation to weaken in the near-term, rapid money supply growth poses medium-term upside risks.

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