Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Deflationary pressures are worsening in China, primarily due to the impact of tariffs on the Producer Price Index (PPI) and the overall economic environment [1][7] - Core Consumer Price Index (CPI) remains stable at 0.5% year-on-year, indicating some resilience despite broader deflationary trends [2][4] - The PPI has shown a significant decline, with a month-on-month decrease of -0.4%, driven by lower prices in oil, raw materials, and durable consumer goods [3][7] Summary by Sections CPI Analysis - Core CPI year-on-year remained at 0.5% in April, unchanged from March, while month-on-month seasonally adjusted annual rate (SAAR) was 0.7% [2] - Food inflation reached its highest level in five months, primarily due to increased prices for fruit and beef, countering the effects of lower international oil prices [2] PPI Analysis - The PPI year-on-year decreased to -2.7% in April, reflecting ongoing tariff impacts and weaker final demand [6][7] - Specific sectors such as textiles, wood products, chemicals, rubber, and plastics experienced accelerated price declines, indicating significant exposure to the US market [3][7] Outlook - The PPI is expected to slip below -3% year-on-year from the current -2.7% during the May-July period due to less favorable base effects and continued tariff impacts [4] - Core CPI is anticipated to soften sequentially as the effects of PPI pass through, although year-on-year figures may remain resilient due to a low base [4][7]

Investment Rating - The report indicates a cautious outlook on the industry, with a potential downside risk of 0.5 percentage points to the 2025 GDP growth forecast if US-China tariffs remain at current levels [11]. Core Insights - The report highlights that while direct tariff impacts have been mitigated by trade rerouting, growth and deflationary pressures are mounting, with real GDP year-on-year expected to slip by approximately 1 percentage point to around 4.5% in the second quarter of 2025 [9][11]. - The report discusses the ongoing US-China trade tensions, noting that the terminal tariff rates will remain elevated despite potential de-escalation talks [5][6]. - It emphasizes the need for policy measures to support consumption and economic growth, including a supplementary fiscal package and monetary easing [34][40]. Summary by Sections Tariff Impact - The report outlines that headline reciprocal tariffs would remain at 60%, but the trade-weighted tariff hike would be reduced to 34% with exemptions on certain products [6][7]. - It notes that the direct tariff shock was mitigated in April, but exports to the US could decline further in May [13]. Economic Growth - Real GDP growth is projected to decline, with a new forecast indicating a drop to around 4.5% year-on-year in 2Q25 [9][10]. - The report suggests that deflationary pressures are likely to persist, affecting overall economic performance [28][30]. Consumption and Investment - There is a noted decline in consumer spending, particularly during the Labor Day holiday, indicating subdued consumption appetite [23][24]. - The report identifies potential investment opportunities in manufacturing upgrades, urban infrastructure renewal, and basic scientific research [36][40]. Policy Measures - The report outlines a series of policy measures aimed at stimulating the economy, including faster issuance of government bonds and a consumer goods trade-in program [34]. - It anticipates a Rmb1-1.5 trillion supplementary fiscal package in the second half of 2025 to support economic recovery [34][40].

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the impact of the ongoing trade war between the US and China on the Chinese economy, particularly focusing on the manufacturing sector and employment dynamics. Core Insights and Arguments 1. **Deterioration in Manufacturing Sector**: The NBS manufacturing PMI fell to 49 in April, indicating contraction and missing expectations significantly (Bloomberg consensus: 49.7, Barclays: 50.2) [7][10][15] 2. **Employment Risks**: Approximately 3% of total employment in China, equating to around 20 million jobs, is estimated to be at risk due to the trade war, particularly affecting export-related jobs [15][16] 3. **Trade Talks Potential**: China has indicated a willingness to engage in trade talks with the US, contingent upon the removal of unilateral tariffs, suggesting a potential for de-escalation in tensions [2][3][4] 4. **Export Resilience**: Despite the trade war, exports remained resilient in April, likely due to exporters front-loading shipments before higher tariffs took effect [8][25] 5. **Shipping Industry Disruption**: High-frequency indicators show a significant decline in container ship departures from China to the US, with estimates indicating a drop of over 40% year-on-year for the week of May 4-10 [9][12] 6. **Deflationary Pressures**: The trade war has intensified deflationary pressures in China, with output prices PMI dropping to 44.8 in April, indicating potential erosion of corporate profits [17][19] 7. **Sector-Specific Impacts**: The services PMI fell to 50.3, with notable contractions in waterway transportation and capital markets, while some sectors like aviation and IT services remained robust [22][23] 8. **Construction Sector Dynamics**: The construction PMI decreased to 51.9, with new orders hitting a low since September, although civil engineering projects showed signs of improvement [24] Additional Important Insights 1. **Trade and Inflation Data**: Upcoming trade data is expected to show a 5% increase in exports for April, while imports are projected to decline by 6% year-on-year [25] 2. **Government Bond Issuance**: Local governments have accelerated special bond issuance, reaching over 27% of the full-year quota, contrasting with 18.5% in the same period last year [24] 3. **Consumer Behavior**: The upcoming Labor Day holiday is anticipated to boost domestic travel, with passenger volumes expected to reach record highs [23] This summary encapsulates the critical points discussed in the conference call, highlighting the challenges and potential opportunities within the Chinese economy amid the ongoing trade tensions.

HOUSTON — BlackRock CEO Larry Fink said Monday that President Donald Trump's deportation policy will have a severe impact on the agriculture and construction sectors, which could lead to elevated inflation in the near term."I think that over the next six to nine months, we're going to see a little more elevated inflation," Fink said the CERAWeek by S&P Global energy conference. "I do believe deportations and the speed at which it is happening is going to have severe impacts on the agricultural sector and th ...