Next Week in China: 22-26 June 2026

Major Data Releases:

• 22 June: China to set June 1-year and 5-year loan prime rates (LPR)
• 23 June: China to host 2026 Summer Davos Forum in Tianjin until 26 June
• 23 June: Hong Kong to report May consumer price index (CPI)
• 25 June: China to conduct medium-term lending facility (MLF) scale of operations and interest rate
• 25 June: Hong Kong to report May external merchandise trade statistics
• 26 June: Macau to report May external merchandise trade statistics
• 27 June: China to report May industrial profits

Next week is expected to be relatively quiet in terms of major data releases for China markets. Attention will also be on the World Economic Forum’s 2026 “Summer Davos” event in Tianjin, which will focus on emerging economies and provide a platform for policymakers, business leaders, think tanks, and other participants to exchange views.

Regarding industrial profits, we expect the cumulative year-on-year growth rate of profits among businesses above the designated size to edge down slightly in January-May. In the first four months of 2026, total profits reached RMB 2.44 trillion (USD 360.5 billion), up 18.2 per cent year-on-year from 15.5 per cent previously, while operating revenue rose by 5.2 per cent. The improvement was mainly driven by higher prices and wider profit margins rather than volume growth. Inventories continued to decline in real terms: finished goods inventories grew by 6.7 per cent year-on-year in January-April, but real inventory growth slowed to 3.8 per cent from 4.7 per cent previously after adjusting for prices. Companies appear to maintain a tight balance between production and sales, adjusting output to match demand. Structural demand recovery, cautious restocking appetite, and rising uncertainty around raw material costs, particularly oils and chemicals, have encouraged firms to digest existing inventories and control procurement.

Profit divergence is likely to remain a key theme, with three segments mainly driving industrial profit growth in January-April. Profits in equipment manufacturing rose 15.4 per cent year-on-year, with electronics profits surging 107.7 per cent on improving demand and prices. High-tech manufacturing profits increased 44.8 per cent supported by semiconductor materials, industrial automation, and medical devices, while raw materials manufacturing profits rose by 88.1 per cent amid higher oil prices and rising demand from new energy and AI-related industries.

Looking ahead, gains in petrochemicals, non-ferrous metals, and chemicals may continue if producer prices move higher while high-tech manufacturing, equipment manufacturing, and AI-related supply chains should provide structural support. Still, the recovery remains uneven: profit gains are still more price- and upstream-driven, while end-user demand remains moderate. Some consumer goods, property-chain and traditional processing sectors may therefore continue to face margin pressure, particularly if raw material costs rise further.

For liquidity, we expect the LPR to remain unchanged for both the one-year (3 per cent) and five-year (3.5 per cent) tenors this month. On the MLF, the central bank has withdrawn short- and medium-term liquidity since March, including through reverse repos, while injecting longer-term funds via one-year MLF operations and government bond trading. This has pushed short-term interest rates higher and created some liquidity pressure for large banks. With outstanding liquidity support already declining and a likely slow recovery in credit demand in the second half of 2026, we cannot rule out a later cut in banks’ reserve requirement ratios to help fill the liquidity gap, akin to replenishing MLF funding.

Chinese equities recovered over the past week, with some exceptions. As of Thursday, 18 June, the MSCI China Index was down 2.83 per cent, while the Shanghai Composite rose 1.46 per cent. The Shenzhen Component and ChiNext indices surged, gaining 7.13 per cent and 11.02 per cent, respectively. Small- and mid-cap stocks outperformed large caps, while growth outpaced value shares. Looking ahead, the market has followed a rise-pullback-recovery pattern in the first half of the year and short-term volatility may persist. Even so, we believe the medium-term uptrend remains intact.

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.