Core Viewpoint - The liquor prices are expected to experience negative year-on-year growth in both 2024 and 2025, marking the first occurrence of such a trend since 2015 [4]. Group 1: Price Trends - In 2025, the Consumer Price Index (CPI) is projected to have a cumulative year-on-year increase of 0%, indicating no overall price change compared to 2024 [2]. - The liquor category specifically is forecasted to see a year-on-year price decline of 1.9% in 2025, following a decline of 1.4% in 2024 [3][4]. - The overall trend in food prices shows that while some categories like seafood and fresh fruits have positive growth, major categories including grains, liquor, and meat are experiencing negative growth [2][3]. Group 2: Economic Context - The economic environment is characterized by a cycle of demand contraction leading to supply adjustments, which in turn exacerbates economic slowdown [5]. - The Central Economic Work Conference in December 2025 emphasized the importance of stabilizing economic growth and ensuring reasonable price recovery through various monetary policy tools [5]. - Structural improvements in prices are noted, but there are concerns regarding the sustainability of these improvements, as they are influenced by factors such as strong pork supply and weak oil prices [5]. Group 3: Future Outlook - For 2026, continued price improvement will require multifaceted efforts to enhance consumer capacity, curb low-price competition, and boost confidence among microeconomic entities [6].

Group 1 - The non-manufacturing business activity index for July is 50.1%, a decrease of 0.4 percentage points from the previous month, but still above the critical point, indicating continued expansion in the sector [9] - The comprehensive PMI output index for July is 50.2%, down 0.5 percentage points from last month, yet remains above the critical point, suggesting that overall production and business activities in China are maintaining expansion [4] - The manufacturing PMI for July has slightly decreased to 49.3%, remaining below the critical point, indicating ongoing economic downward pressure [7] Group 2 - The new orders index in the manufacturing PMI has dropped by 0.8 percentage points to 49.4%, entering the contraction zone, reflecting a potential weakening in market demand [8] - The production index stands at 50.5%, down 0.5 percentage points, while the supplier delivery time index is at 50.3%, up 0.1 percentage points, indicating mixed signals in manufacturing activity [7] - The construction activity index for July is 50.6%, a decrease of 2.2 percentage points, influenced by adverse weather conditions affecting construction activities [9] Group 3 - Analysts suggest that the decline in manufacturing PMI is primarily due to weakened external demand and a slowdown in domestic consumption growth, particularly in the real estate market [8][10] - The prices of major raw materials have shown improvement, with the purchasing price index rising to 51.5%, marking the first increase above the critical point since March [8] - The overall economic outlook indicates a need for increased macroeconomic policy adjustments to counteract the downward pressure observed in both manufacturing and non-manufacturing sectors [10][11]

Economic Growth and Demand - China's GDP grew by 5.3% year-on-year in the first half of the year, showing resilience despite a complex internal and external environment [2] - Investment growth rate decreased from 4.2% in Q1 to 2.8% in H1, below last year's annual growth rate of 3.2% [2] - Consumer spending increased from 4.6% to 5% year-on-year, but June's growth of 4.8% was a decline from May [2] Price Levels and Market Dynamics - June's CPI rose by 0.1% year-on-year, significantly below the 2% annual target, while PPI's decline expanded from -2.2% to -3.6% [3] - The persistent low price levels indicate a significant supply-demand imbalance, leading to reduced confidence among businesses and consumers [3][4] - Market mechanisms are exacerbating demand contraction, as low prices lead to cautious investment and consumption behaviors [3][4] Investment Trends - Investment growth in Q2 showed a notable decline, influenced by falling market prices and cautious corporate outlooks [7] - Real estate investment fell by 11.2% year-on-year in H1, with a 9.9% decline in Q1, reflecting weak demand and market sentiment [7][8] - The manufacturing sector's investment growth decreased due to negative expectations regarding future sales and profitability [7] Government Role and Policy Recommendations - The government is urged to increase public investment to counteract demand contraction and stimulate economic growth [9][11] - There is a need for a proactive macroeconomic policy to address the prolonged demand contraction and its underlying issues [9][10] - The government has the capacity to enhance public goods and services, which can effectively stimulate demand and support economic recovery [10][12]