Investment Rating - The report indicates a steady growth outlook for the industry, with a firm policy determination to meet the GDP target despite limited urgency for immediate policy changes [1][5]. Core Insights - Manufacturing PMI increased slightly to 49.7 in June, indicating a continued contraction for the third consecutive month, while non-manufacturing PMI rose to 50.5, remaining in expansion [3][4]. - China's exports to the US showed signs of recovery in June, contributing to overall growth, while domestic demand, particularly in property sales, appears to be weakening [5][6]. - The report estimates real growth for 25H1 at 5.3% and anticipates only minor adjustments in monetary policy, including a 10 basis points rate cut and a 50 basis points RRR cut in 25H2E, alongside an additional RMB500 billion in quasi-fiscal stimulus [1][5]. Summary by Sections Manufacturing Sector - Manufacturing PMI rose by 0.2 percentage points to 49.7, slightly above market expectations, but still indicates contraction [3]. - The employment subindex showed deterioration, particularly among small enterprises, which fell to an eight-month low [3][6]. Non-Manufacturing Sector - Non-manufacturing PMI increased by 0.2 percentage points to 50.5, surpassing market expectations [4]. - The construction sector was a significant driver, with the construction PMI rebounding to 52.8, marking five consecutive months of expansion [6]. Export and Import Trends - New export orders increased by 0.2 percentage points to 47.7, suggesting a potential recovery after significant declines in previous months [6]. - Imports rose by 0.7 percentage points to a four-month high at 47.8, indicating improved production momentum [6].

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].

Investment Rating - The report does not explicitly state an investment rating for the industry Core Insights - The Politburo has pledged to coordinate domestic policy and implement existing policies more aggressively, including faster issuance of government bonds and potential cuts to the reserve requirement ratio (RRR) and policy rates [3] - Real GDP growth is projected to soften, with 2Q real GDP tracking at less than 4.5% year-on-year [4] - Persistent deflationary pressures are noted, with a significant decline in container throughput to the US due to tariffs [7][8] - Household sentiment regarding consumption is weakening, driven by concerns over job security and salary amidst US tariff hikes [12] - The property market sentiment has cooled, with increased expectations of price declines and a rise in eager sellers [16] Policy Measures - The report outlines specific measures such as unemployment insurance rebates to exporters, a new relending facility for service consumption, and increased funding support for consumer trade-in programs [3] - A supplementary fiscal package of RMB 1-1.5 trillion is expected in the second half of 2025, alongside enhanced infrastructure and tech investment support [40] - The government is expected to implement a consumption-focused fiscal package of RMB 10 trillion over the next two years [49] Economic Indicators - The report indicates that 36% of the 2025 government bond quota has been utilized, compared to an average of 20% in the past five years [44] - Local government special refinancing bond net issuance is reported at RMB 1.5 trillion out of a total of RMB 2 trillion for local government debt swaps [47] - The US weighted average tariffs on China's exports are projected to remain high, with trade-weighted tariff hikes reduced to 34% with exemptions [22][24]