China's domestic activity data for December were on par with Barclays' forecast and somewhat weaker than consensus expectation. The Year to Date fixed asset investment growth decelerated to 10% y/y in December from 10.2% in November, whereas it was 12% in real terms. Growth in infrastructure slowed to 17.2% from 18.2%, whereas in manufacturing it slowed from 8.4% to 8.1%. Meanwhile, real estate sector saw a slowdown from 1.3% to 1%. Growth in China's industrial production slowed to 5.9% y/y in December.

The country's retail sales growth continues to be strong, but recorded a modest growth of 10.7% in December, as compared with 11% in November. China recently released its December trade data that showed narrowing of contraction in exports and imports from November. The country's December CPI inflation accelerated to 1.6%, mainly due to food prices. However, PPI deflation rose marginally, with the index dropping 5.9% y/y.

The Q4 2015 GDP growth for China was at 6.8% y/y, indicating weakening of real activity. On a quarterly basis, the Chinese economic growth eased to 1.6%. Also, the growth on a quarterly basis is expected to have moderately expanded in Q4 due to the rise in Caixin manufacturing PMI and robust retail sales in Q4. According to Barclays, macro policies should be accommodative for a longer period of time.

"China's GDP is expected to grow 6% in 2016, as compared with consensus of 6.5%, due to market disturbance and strong headwinds. The country's real estate investment is likely to moderately grow in H1 2016, while housing starts and land purchases are expected to remain in negative territory", says Barclays.