Next Week in China: 19-23 May 2025

Major Data Releases:

• 19 May: China to hold press conference on latest national economic performance
• 19 May: China to report April industrial output
• 19 May: China to report April energy production levels
• 19 May: China to report April investment in fixed assets (excluding rural households)
• 19 May: China to report April total investments on real estate development
• 19 May: China to report April total retail sales (TRS) of consumer goods
• 19 May: China to report April sales price indexes of commercial residential buildings
• 20 May: China to report May 1-year and 5-year loan prime rates (LPR)

Next week will be significant for China in terms of data releases, as it will include economic data points that were originally scheduled for last week.

In terms of TRS, we expect the April figures to increase by around 5 per cent year-on-year. Firstly, with the Labour Day holiday extended by one day, tourism figures have been improving. In April, the intensity of residents’ travel showed a significant recovery, with intercity travel performing better than intra-city travel. Travel-related and gathering-related consumption, which have strong social attributes, are expected to remain resilient. Secondly, various manufacturers are actively releasing new technologies and models, supported by stimulus measures, to provide strong backing for automobile retail sales. High-frequency data indicate that in April, the trade-in of home appliances and cars remained robust, with the Passenger Car Association predicting a 14.3 per cent annualized growth in retail sales of passenger cars for April. Thirdly, real estate sales data indicate a decline in the sales area for commercial housing in 30 major cities, which is expected to negatively impact consumption related to the post-real estate cycle.

For Investment in Fixed Assets (excluding rural households), we expect the growth rate to remain relatively stable at a 4.4 per cent projection from January to April 2025. By sector, infrastructure investment is expected to grow by 5.7 per cent year-on-year, manufacturing investment by 9.3 perc cent, while real estate development investment is expected to decline by 10.1 per cent. Notably, with policy support for equipment upgrades through ultra-long-term special bonds, investing in equipment may become a source of incremental flexibility with the purchase of equipment and tools seen to continue its upward trend. More importantly, several internet technology companies have released financial reports and updated their future capital expenditure plans since the start of the year. Major leading companies are expected to increase their AI investments especially with the emergence of DeepSeek, which may further enhance the flexibility of fixed asset investment in the sectors of information transmission, software, and information technology services.

Regarding the LPR, with the 7-day reverse repo rate in the open market being cut by 0.1 percentage points last week, it is expected that the LPR will also decrease by 0.1 percentage points through market-based interest rate transmission.

Chinese equities sustained their winning streak this week. As of Thursday, 15 May, the MSCI China Index had increased by 2.89 per cent from last week’s finish, the Shanghai Composite Index rose by 1.16 per cent, the Shenzhen Component Index by 0.59 per cent, and the ChiNext Index by 1.56 per cent. From a size perspective, large-cap stocks outperformed small- and mid-cap stocks while value stocks outperformed growth stocks when viewed from a style perspective. Looking ahead, the recent easing of reciprocal tariffs between China and the US, along with China’s announcement of a package of incremental policies on 7 May – covering reserve requirement ratio cuts, interest rate cuts, expansion of structural monetary policy tools, and quasi-stabilization funds – reflect the Chinese government’s emphasis on stabilizing the economy, financial markets, and market expectations. In the context of heightened external uncertainties, these measures help alleviate market concerns. Although they may not be sufficient to achieve a comprehensive improvement in medium-term fundamentals, these policy adjustments are expected to stabilize the market in the short term and raise the medium-term market volatility centre.

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.