Next Week in China: 24-28 February 2025

Major Data Releases:

• 25 February: Hong Kong to report January data on external merchandise trade
• 26 February: Macau to report January data on external merchandise trade
• 26 February: Hong Kong to report final figures for 2024 Q4 and full-year GDP growth
• 26 February: Taiwan to report 2025 economic forecast
• 26 February: Taiwan to report Q3-Q4 2024 GDP
• 28 February: Macau to report 2024 Q4 and whole year GDP
• 28 February: China to publish Statistical Communiqué on the 2024 National Economic and Social Development
• 1 March: China to report February Purchasing Managers’ Index (PMI) readings

Next week will be another period with few major data releases for Mainland China. Aside from the Communiqué for 2024 that would summarize the country’s economic situation for the past year, the National Bureau of Statistics of China will publish industrial PMI data.

For the Services PMI, we expect it to remain in growth territory for February following the Spring Festival holiday. The Services PMI stood at 50.3 per cent in January, a decrease of 1.7 percentage points from December but still on the expansionary range. The impact of the weeklong holiday on the services sector is twofold: industries directly related to consumer spending, such as tourism, dining, accommodation, and shipping, experienced increased sales due to the surge in demand. However, productive service industries such as logistics and business services may have performed weakly due to holiday shutdowns. Comparatively, the decline in the Services PMI for this year’s Spring Festival month ranks as the largest in the past decade, which to some extent reflects weaker demand in the services sector. Nonetheless, it is worth mentioning that February saw unprecedented enthusiasm for movie-watching. Chinese movie Ne Zha 2 successfully surpassed the RMB 10 billion (USD 1.4 billion) mark at the box office, becoming the highest-grossing animated film of all time.

For the Industrial PMI, we anticipate the February figure to hover around the boom-bust line of 50. In January, the PMI was 49.1 per cent, a decrease of 1 percentage point from the previous month. Among the sub-indices, the production index was at 49.8 per cent, the new orders index at 49.2 per cent, and the new export orders index was at 46.4 per cent. Additionally, the PMI for large, medium, and small enterprises last month was below the 50 per cent threshold as well. The structure of new renminbi loans in January indicates that credit growth was mainly concentrated on large enterprises and infrastructure, while financing demand in other areas such as consumption might not have been fully met, leading to uneven economic recovery. Further, household credit, especially short-term and medium to long-term loans, remain weak, indicating that the rebound in the consumer and real estate segments is taking time. Similarly, the decline in the manufacturing PMI during this year’s Spring Festival period is among the highest over the past decade. Considering that the statistical period for the PMI did not yet include the official start of the Spring Festival holiday, the post-holiday rebound in February’s PMI may also fall short of expectations, particularly for small and medium-sized enterprises.

For equities, as of Thursday, 20 February, the MSCI China Index declined by 0.51 per cent from the previous week. Meanwhile, the Shanghai Composite Index increased by 0.12 per cent, the Shenzhen Component Index climbed by 0.42 per cent, and the ChiNext Index rose by 0.46 per cent. During this period, small and mid-cap stocks continued to outperform large-cap stocks. From a style perspective, growth stocks slightly outpaced value stocks, contrary to the week prior. Looking ahead, the pickup in Chinese tech stocks driven by DeepSeek remains the main trading theme in early 2025. Companies across various industries are rapidly deploying DeepSeek to integrate AI applications into their products and services. Different thematic branches are rotating and catching up. The focus on Chinese technology, media, and telecommunications companies saw stock trading volume growth exceeding 40 per cent, continuously reaching new highs since 2018.

This piece has been co-produced with Yiyi Capital Limited in Hong Kong, a China specialist and a part of a global financial services group.