Goldman Sachs(US:GS) Goldman Sachs·2025-07-01 00:40Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Onshore clients have become less bearish on China's near-term growth outlook, with expectations for RMB appreciation against USD and a belief that exports may be more resilient than previously feared [1][2] - Clients express skepticism regarding incremental policy easing, viewing the current easing mode as reactive rather than preemptive, and anticipate further fiscal expansion in H2 to stabilize growth [2][10] - Concerns about US-China tariff negotiations remain, with clients expressing low conviction in potential outcomes and expecting tariffs to remain at current levels for the rest of the year [3][8] Summary by Sections 1. Near-term Growth Outlook - Onshore clients have adjusted their views to be less negative about China's growth, noting resilience in macro data and some bargaining power in trade negotiations [2] - Clients believe that solid GDP growth in H1 may reduce the urgency for significant policy stimulus, although further fiscal measures are still deemed necessary [2][10] 2. US-China Tariff Relations - Clients show low conviction regarding the future of US-China tariffs, with expectations that current tariffs (around 39%) may persist [3][8] - The complexity of potential trade deals is acknowledged, with clients anticipating that any agreement would be more complicated than previous arrangements [3] 3. Exports, Consumption, and Inflation - While strong exports are not seen as sustainable, clients expect some resilience in H2, with concerns about the property sector and PPI deflation remaining [9] - The report forecasts CPI at 0.0% and PPI at -2.4% for 2025, with expectations for home prices in top-tier cities to stabilize by H2 2026 [9] 4. Triggers for Policy Easing - Clients identify potential triggers for policy easing, including rising youth unemployment, falling home prices, and significant declines in durable goods sales [10] - There is a belief that some pro-growth policies may not yet be fully priced in for the remainder of the year [10] 5. RMB and Interest Rates - Onshore clients expect further RMB appreciation against USD, with forecasts of USDCNY at 7.1/7.0/6.9 over the next 3, 6, and 12 months [12] - Clients anticipate that China rates will remain low for an extended period, with a wide interest rate differential between China and the US [12] 6. Onshore vs Offshore Client Perspectives - Differences in perspectives are noted, with onshore clients focusing more on stabilizing the property sector and improving local policy implementation, while offshore clients emphasize signals from policy meetings [13] - Both groups see more upside than downside for China equity and RMB, viewing Q3 as a critical period for market developments [13]