Next Week in China: 27-31 January 2025

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Major Data Releases:

27 January: China to report January Purchasing Managers’ Index (PMI)
27 January: China to report December profit of industrial enterprises above the designated size
27 January: China to report results of survey on business revenue of cultural enterprises above designated size
27 January: Hong Kong to report December foreign trade balance
27 January: Macau to report December foreign trade balance
31 January: Caixin to report December China’s Manufacturing PMI

Next week, there are several major data releases that will complete the picture for China’s economic situation in 2024. Additionally, it will be the celebration of the Lunar New Year. The Mainland China market will be closed from 28 January until 4 February. The Macau and Hong Kong markets will be closed for three days (29-31 January), while the Taiwan market will be closed for the entire week (27-31 January).

Regarding PMI, we anticipate a slight seasonal decline in January due to disruptions from the Chinese Lunar New Year holidays. For the month, the Strategic Emerging Industries Purchasing Managers’ Index (EPMI), a leading indicator for PMI and a gauge of growth for tech-driven businesses, decreased by 4.7 points to 45.6. This drop is smaller compared to comparable periods in previous years, namely in 2017 (-7.0 points), 2020 (-6.1), and 2022 (-5.8). Growth-stabilizing policies, like the expansion of the “trade-in” program for gadgets and motor vehicles to cover more categories, may have softened the contraction. However, there is still room for improvement as the EPMI level of 45.6 is only better than the levels seen in February 2020, 2021, and 2024. Companies slowed down in anticipation of the holidays, resulting in month-on-month declines in production, product orders, and export orders. Production alone accounted for 49 per cent of the monthly EPMI decline. Despite the significant reduction, the production-to-demand ratio considerably improved but at a level that is typical running up to Chinese New Year celebrations. The supply-demand imbalance persists, with the average production-to-demand ratios from 2021 to 2024 tallied at 0.7, 2.2, 3.3, and 3.6, respectively.

For equities, stock market indices saw mixed movements as US President Donald Trump, who once vowed to impose higher tariffs on Chinese imports, took office. As of Thursday, 23 January, the MSCI China Index increased by 0.73 per cent. In contrast, the Shanghai Composite Index went down by 0.36 per cent, the Shenzhen Component Index gained 0.15 per cent, and the ChiNext Index increased by 1.26 per cent. During this period, small, mid, and large cap stocks performed similarly. From a style perspective, value stocks slightly outperformed growth stocks. Looking ahead, Trump has indicated the possibility of adopting incremental monthly increases for imposing tariffs on Chinese goods, intending to use it as a negotiation tool. Therefore, the market’s focus suggests that tariff intensity might be weaker than his campaign commitments. From a domestic perspective, onshore demand must pick up given significant uncertainties facing goods exports. Sustaining China’s economic recovery in 2025 will require further policy support.

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.