13 July 2025 | 10:12PM HKT China: Three things in China Three quick highlights from China: n PPI deflation deepened in June: Although China's CPI inflation edged up from -0.1% yoy in May to +0.1% yoy in June, PPI inflation dipped further from -3.3% yoy to -3.6% yoy. This marks the most negative PPI inflation since July 2023 and the 33rd consecutive month of year-on-year PPI deflation. Combined with domestic concerns over manufacturers' delaying payments to suppliers and increased complaints from major tradi ...

Investment Rating - The report indicates a cautious outlook for the Chinese economy, suggesting a potential demand cliff in H2 2025, leading to a GDP growth forecast drop to 4.0% year-on-year from approximately 5.1% in H1 2025 [3][4]. Core Insights - The report highlights a recurring pattern in China's economic performance, where optimism in the first half of the year is often followed by disappointing outcomes in the second half, particularly in 2023 and 2024 [2]. - Austerity measures initiated in mid-May are expected to significantly impact consumption, particularly in the services sector, leading to a notable slowdown in retail sales growth to 3.1% year-on-year in H2 from an expected 5.1% in H1 [8][11]. - The property market continues to face severe challenges, with new home sales volume and value declining significantly, indicating a prolonged correction phase [32][35]. Summary by Sections Economic Outlook - The report anticipates a demand cliff in H2 2025 due to multiple factors, including austerity measures, a payback effect from durable goods sales, and ongoing issues in the property sector [3][4]. - GDP growth is projected to decrease to 4.0% year-on-year in H2 from around 5.1% in H1 2025 [3]. Austerity Measures - The new anti-extravagance campaign has led to a significant drop in demand for services, particularly in the catering and alcohol sectors, with retail sales growth expected to slow to 3.1% year-on-year in H2 [6][11]. - The average funding for the consumer trade-in program is projected to decrease, further impacting retail sales growth [7][13]. Property Market - The property market is entering its fifth year of correction, with new home sales and prices continuing to decline, particularly in large cities [32][33]. - Existing home prices in tier-1 cities fell by 0.9% in April-May 2025, indicating ongoing weakness in the housing market [34]. Export Sector - China's export growth is expected to slow sharply in H2 2025 due to payback effects from front-loading and high tariffs, with a full-year export growth forecast of 0.0% [44][45]. - High-frequency data indicates strong headwinds for exports, with manufacturing sector PMIs reflecting contraction [45][46]. Investment Trends - Investment growth in key sectors has decelerated, with significant declines noted in the solar and lithium-ion battery sectors, highlighting the need for regulatory intervention [26][27]. - The report emphasizes that the ongoing issues of overinvestment and capacity underutilization are likely to create short-term economic headwinds [24][25].

July 9, 2025 04:00 AM GMT China Economics | Asia Pacific PPI Deflation Deepens Key Takeaways Stable core CPI, less drag from food and energy: Core CPI edged up 0.1ppt to 0.7%Y from a low base, while its MoM growth held steady at 1.1% SAAR (on par with April and May), thanks to consumer subsidies (CPI factor in undiscounted prices). Meanwhile, food prices came in strong at 12%M SAAR amid unfavorable weather (per NBS), and oil CPI rebounded 5%M SAAR (vs. sharp drop in previous months). PPI - weak final demand ...

(*seasonally adjusted by GS) Main points: 1. China's headline CPI inflation was unchanged at -0.1% yoy in May, as the decline in goods prices was offset by higher services prices (Exhibit 1). In month-on-month terms, headline CPI fell to +0.5% (annualized, seasonally adjusted) in May (vs. +0.8% mom s.a. ann in April). 2. In year-over-year terms, food inflation edged down to -0.4% yoy in May from -0.2% yoy in April. This is primarily due to lower prices of fresh vegetables (Exhibit 2). Among major food items ...