Next Week in China: 23-27 June 2025

Major Data Releases:

• 23 June: Taiwan to report May employment statistics
• 24 June: China to hold 2025 Summer Davos forum in Tianjin until 26 June
• 26 June: Hong Kong to report March wage and payroll statistics
• 26 June: Hong Kong to report May data on external goods trade
• 26 June: Macau to report May External Merchandise Trade Statistics
• 27 June: China to report end-May industrial profits for enterprises above the designated size
• 27 June: Macau to report March-May employment statistics

Next week is expected to be relatively quiet in terms of major data releases for mainland China, with only industrial profits for May 2025 in the schedule. Attention will also be on the 24-26 June 2025 Summer Davos Forum, which focuses on emerging economies and provides a platform for dialogue among representatives of governments, businesses, think tanks, and other sectors around the world.

From January to May, we expect a slight moderation in the Profit of Industrial Enterprises Above Designated Size, with year-on-year growth likely easing to around 1 per cent. This is slower than the 1.4 per cent growth recorded in the January-April period, equivalent to RMB 2.12 trillion (USD 294.5 billion). Notably, the 0.8 per cent profit growth in the first quarter represented a significant turning point: a reversal from the negative trend seen in 2024, when profits declined by 4.1 per cent year-on-year. This suggests that the prolonged downturn in corporate profitability since the third quarter of last year has been reversed. The improvement in January-March followed by an accelerated recovery in April was largely driven by the continued effectiveness of the “Two New” policy initiatives, namely support for large-scale equipment upgrades and trade-in programs for consumer goods, as well as by sustained momentum from frontloaded exports ahead of higher US tariffs.

According to data from January to April, policy support for large-scale equipment renewals significantly boosted profits in the special-purpose and general-purpose equipment manufacturing sectors, which rose by 13.2 per cent and 11.7 per cent, respectively. Together, these sectors contributed 0.9 percentage points to the overall growth in industrial profits. Within these categories, sub-industries such as electronic and electrical machinery, general components, and specialized equipment for mining, metallurgy, and construction recorded notable profit increases of 69.8 per cent, 24.7 per cent, and 18.3 per cent, respectively. Similarly, household appliance-related sectors performed strongly, with higher profits tallied for household electrical components (17.2 per cent), kitchen appliances (17.1 per cent), and non-electric home appliances (15.1 per cent).

However, May data indicates that industrial value-added growth for enterprises above the designated size slowed by 0.3 percentage points from April to 5.8 per cent. This is primarily attributed to the continued deterioration in the external trade environment that has weighed on export performance. In May, the year-on-year growth of industrial export delivery value slowed to 0.6 per cent from 0.9 per cent in April. Although the mid-May easing of US-China trade tensions offered some short-term relief, American tariffs on Chinese goods remain elevated. Combined with a persistent trend of softening external demand, export growth is expected to remain subdued in June, and this will continue to drag industrial output.

At the same time, the positive effect from domestic demand stimulus policies appears to be fading. Due to funding shortfalls and transitional delays, some regions have temporarily suspended central government subsidies (guo bu) in June. As a result, business profitability is likely to decline. Looking ahead, we expect a continued slowdown in industrial production growth. For the full year, industrial output growth is likely to fall short of GDP growth, with economic momentum expected to shift further toward the services sector.

Chinese stocks snapped an uptrend seen earlier this month to record week-on-week declines across major indices. As of Thursday, 19 June, the MSCI China Index dropped by 2.39 per cent, the Shanghai Composite Index fell by 0.44 per cent, the Shenzhen Component Index slid by 0.69 per cent, and the ChiNext Index fell by 0.83 per cent. During this period, large-cap stocks slightly outperformed small- and mid-cap stocks. From a style perspective, value stocks outperformed growth stocks.

Looking ahead, recent data indicate that inflation remained subdued in May, suggesting that domestic demand still requires further stimulus support. Although total social financing exceeded expectations for the month, it was mainly driven by government bond issuances while short-term household loans and medium- to long-term corporate loans posted limited improvement. Export growth also slowed in May, but overall exports remained resilient despite a sharp drop in shipments to the US, indicating a persistent slowdown.

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.