Summary of Key Points from the Conference Call Industry Overview: Capital Goods - **China's Economic Performance**: China's GDP growth in H1 was +5.3% YoY, supported by export frontloading and government stimulus. However, signs of a sequential slowdown are emerging, with manufacturing and infrastructure fixed asset investment (FAI) declining by -1.3% and -6.4% YoY in August, compared to -0.3% and -2% YoY in July [1][29] - **GDP Growth Forecasts**: The GDP growth forecasts for Q3 and Q4 2025 have been revised down to +4.5% and +4% YoY, respectively, while the FY forecasts for 2025-2027 remain unchanged at +4.7% to +4.1% YoY [1][29] - **Market Conditions**: Companies exposed to China are facing a difficult market, with a shift towards local-for-local strategies due to increasing competition [1] Automation Sector - **Market Recovery**: A mild recovery in the China Automation market is expected in 2025, with Factory Automation (FA) orders showing strength, particularly in the battery segment. Domestic companies like Inovance reported FA orders up over 20% YoY in August [2][30] - **Inventory Levels**: Distributors' inventories for major companies like Siemens and Omron have normalized, which is expected to support growth moving forward [2][30] - **Forecast Adjustments**: The growth forecast for the China Automation market has been cut to +0.2% YoY for 2025, with Factory Automation revised to +1.7% YoY due to demand uncertainty and weaker-than-expected demand from electronics [31] Construction Sector - **Property Market Outlook**: The outlook for the China property market remains weak, with new home sales down 9.7% YoY in August. No meaningful recovery is expected in the near term due to lack of government support [3][48] - **Construction Machinery Demand**: Demand for construction machinery is positive, driven by large infrastructure projects and increased government support for modernization projects [3][48] Consumer Sector - **Retail Sales Trends**: Retail sales growth slowed to +3.4% YoY in August, down from +3.7% in July, indicating a peaking of consumer durable subsidies. However, expectations for future spending are at a 16-month high, with 46% of respondents expecting to increase spending in the next six months [4][61][66] Key Companies and Their Exposure to China - **Company Exposure**: Kone has the highest exposure to China, with 26% of group sales in FY23, down from 31% in FY22. Other companies with significant exposure include Atlas, Metso, and ABB [9][10] - **Performance Insights**: Siemens Digital Industries reported a 19% YoY revenue growth in China for Q3'25, driven by strong demand in the battery segment [34][37] Additional Insights - **Manufacturing PMI**: The NBS manufacturing PMI for August was 49.4, indicating continued demand weakness, with new orders remaining in contraction territory [14][17] - **Price Pressures**: Rising purchase and producer prices indicate ongoing cost pressures, exacerbated by tariffs and trade tensions [17][22] - **Government Policy**: Limited room for substantial easing efforts from the government is anticipated, with policymakers comfortable with the current growth trajectory [29] This summary encapsulates the critical insights from the conference call, highlighting the challenges and opportunities within the capital goods sector, particularly in relation to the Chinese market.