Investment Rating - The report indicates a real GDP growth forecast for China of 4.6% in 2025, revised from 4.0% due to changes in US tariffs and economic conditions [3][4]. Core Insights - There has been no significant shift from external to domestic demand in China's economy, with exports remaining strong despite higher US tariffs [3][8]. - Retail sales growth has improved, largely driven by a government-subsidized consumer goods trade-in program, with some categories seeing sales growth exceeding 20% year-on-year [11][8]. - The property sector has shown signs of weakness, with new property starts down approximately 75% from peak levels and property sales dropping by about 50% [16][21]. - The labor market is currently very weak, with employment sub-indices indicating significant slack, particularly in construction and small businesses [17][21]. - The Chinese Yuan (CNY) is expected to begin a multi-year strengthening path against the USD, as it is considered significantly undervalued [22][23]. Summary by Sections Economic Overview - The US effective tariff rate on Chinese goods is projected to remain around 40% for the remainder of the year, impacting growth forecasts [3][7]. - Despite higher tariffs, export volume increased by 13% year-on-year in April, indicating resilience in the export sector [3][8]. Retail Sector - Retail sales growth improved to 4.7% year-on-year in January-April 2025, compared to 3.5% in the same period of 2024, primarily due to the trade-in program [9][11]. Property Market - The property market has weakened, with new property starts and sales significantly declining, indicating a destocking process to clear excess inventory [16][21]. Labor Market - Employment indices from various PMIs show that the labor market is extremely weak, particularly in construction and small businesses, with many indices below the 5th percentile of historical performance [17][21]. Currency Outlook - The CNY is expected to strengthen against the USD, supported by undervaluation and competitive manufacturing factors, with a revised 12-month forecast of 7.00 for USDCNY [22][23][28].