Core Viewpoint - The article discusses the inflation trends in May, highlighting a slight decrease in CPI and a more significant drop in PPI, with implications for future economic conditions and policy responses [1][10]. Group 1: CPI Inflation - May CPI inflation was reported at -0.1% year-on-year, matching the previous value and exceeding market expectations of -0.2% [1][2]. - Energy prices have significantly dragged down CPI inflation, while core CPI showed slight upward support [2][6]. - Food prices experienced a mild decline, with a 0.2% drop month-on-month, which is less than the average decline of 1.4% over the past five years [5]. - Core CPI inflation rose slightly by 0.1 percentage points to 0.6% year-on-year, although month-on-month momentum has weakened [6][7]. - Service prices remained resilient, with travel prices increasing by 0.8% month-on-month, surpassing the five-year average of 0.2% [6]. Group 2: PPI Inflation - May PPI inflation was reported at -3.3% year-on-year, a decrease of 0.6 percentage points from the previous month, and -0.4% month-on-month, which is weaker than the historical average since 2017 [10][12]. - The decline in PPI is attributed to weak oil prices affecting the entire industrial chain and a slowdown in the construction sector due to adverse weather conditions [10][12]. - Despite the overall decline, there are signs of recovery in prices related to exports and new growth sectors, with textile prices narrowing their decline and some electronic prices turning positive [12][15]. Group 3: Forward Outlook - Looking ahead, energy prices are expected to remain weak, with Brent crude oil projected to fluctuate between $60 and $70 [9]. - The overall pace of CPI recovery is anticipated to be slow, influenced by policies aimed at boosting domestic demand and consumption [16]. - For the second quarter, CPI inflation is expected to stabilize around 0%, while PPI inflation may drop to approximately -3.0% [16].

Core Viewpoint - The article discusses the weak performance of CPI and PPI in May 2025, highlighting a deflationary trend and the factors contributing to this situation, including energy and food prices, as well as the broader economic implications for GDP growth and investment opportunities [1][4][11]. CPI Analysis - In May 2025, the CPI year-on-year was -0.1%, unchanged from the previous value, while the PPI year-on-year was -3.3%, lower than the previous -2.7% [1][4]. - The simulated deflation index, based on CPI and PPI weights of 60% and 40%, was -1.38%, the lowest in the past 16 months [1][4]. - The decline in CPI is attributed to a 1.7% month-on-month decrease in energy prices, which negatively impacted CPI by approximately 0.13 percentage points, primarily due to the transmission of commodity price declines influenced by tariffs [6][7]. - Food prices also saw a month-on-month decrease of 0.2%, contributing to a 0.04 percentage point drag on CPI, with weak demand in the restaurant sector being a significant factor [6][7]. PPI Analysis - The PPI decline was exacerbated by two main factors: a decrease in global pricing raw materials and weak domestic construction product pricing [8][9]. - The oil extraction, processing, and chemical industries experienced expanded declines due to falling oil prices, with year-on-year price drops of -17.3% for oil extraction and -14.7% for oil processing [8][9]. - New industry products made a slight positive contribution to PPI, with some sectors like automotive and electronics showing a slight narrowing in their year-on-year decline [8][9]. Future Price Trends - Looking ahead, there is a potential for a slight narrowing of PPI declines in June due to recent rebounds in oil and copper prices, indicating a possible improvement in global pricing factors [10]. - However, to significantly alter the low PPI situation, prices in the construction and emerging industries need to exit the negative growth range, which requires effective local government investment strategies [10]. Economic Outlook - The macroeconomic environment since the "924" policy has shown signs of stabilization, with actual GDP growth expected to remain above 5% in the second quarter of 2025, despite pressures from exports to the U.S. [11]. - The current economic challenges are primarily related to low prices and nominal GDP, leading to high real interest rates and a heavier debt burden, which could affect investment and consumption opportunities [11].

Core Viewpoint - The manufacturing sector showed mild recovery in May, with the manufacturing PMI rising by 0.5 points to 49.5, slightly above the seasonal average. However, this increase is not strong considering the low base from April due to tariff impacts. The absolute value of 49.5 is only better than May 2019 and May 2023 in the past decade [1][7][8]. Manufacturing Sector Analysis - In May, the manufacturing sectors that improved can be categorized into three types: emerging manufacturing (computer communication electronics, electrical machinery), essential consumer agricultural products, and the petrochemical industry chain (petrochemical refining, chemicals, synthetic fibers, and plastics) [2][9]. - The macroeconomic clues behind these improvements include: the cancellation of high tariffs leading to better export orders, the continued effects of domestic "two new" policies, and demand growth from the AI industry. The sectors experiencing significant downturns are mainly in the construction chain and optional consumer goods [2][9]. - The electrical machinery sector is leading in terms of prosperity, with a PMI above 55, benefiting from rapid growth in new energy and new energy vehicles, as well as policy dividends from "two new" initiatives [3][11]. Emerging Industries - Emerging industries such as new generation information technology, new materials, high-end equipment, and energy-saving and environmental protection sectors showed improved prosperity in May. This is attributed to the rebound in external demand and domestic policy support [3][12]. - The biological industry remains the weakest, with a significant decline in export orders continuing from April [3][12]. Construction Sector Insights - The construction industry in May is characterized by "infrastructure improvement and real estate drag." Civil engineering construction saw a continuous improvement for two months, while the real estate chain showed weakness across all stages [4][15]. - The construction activity index decreased by 0.9 points to 51.0 in May, indicating a slowdown in the real estate sector [14][16]. Service Sector Performance - The service sector saw a slight improvement, with the PMI rising by 0.1 points to 50.2. Key drivers include travel-related sectors benefiting from the May Day holiday and a rebound in the water transport industry [6][17]. - The information technology service sector continues to perform well, driven by trends such as "AI+" and online consumption [6][17]. Summary of Key Insights - The "two new" policies are concentrated in sectors benefiting from tariff reductions, such as electrical machinery and computer electronics, which currently show high prosperity [5][6]. - The new generation information technology sector leads in emerging industries, while the service sector's IT services maintain a leading position [5][6]. - External uncertainties continue to impact sectors like textiles, pharmaceuticals, and biotechnology, as indicated by their performance data [5][6]. - The construction sector is experiencing a rise in prosperity due to accelerated issuance of special bonds and project implementations, although upstream material sectors remain under pressure due to real estate slowdowns [5][6].

Core Viewpoint - The article discusses the potential for the upward limit of equity assets to be opened further through three emerging clues: government investment acceleration, supply-demand relationship management, and improvements in US-China trade relations. Group 1: Government Investment - Government investment is expected to accelerate following the issuance of special bonds and project implementation, with significant activity anticipated in May. The issuance of special bonds began on April 24, and the acceleration of project implementation is expected to lead to increased construction activity, particularly in urban renewal projects [2][4]. - The economic data from April indicates that while equipment and appliance sales are strong, the real estate and narrow infrastructure sectors are lagging, with fixed asset investment showing a year-on-year increase of only 3.6% [2]. Group 2: Supply-Demand Relationship - New signals from policies indicate a shift towards managing low prices and addressing "involution" competition. The central bank's report emphasizes a transition from managing high prices to low prices, aiming for high-quality development and preventing disorderly competition [3]. - The past two years have seen nominal growth rates lag behind actual growth, leading to higher real interest rates, which in turn dampen investment and consumption. Improving the supply-demand balance is seen as a pathway to raise the price level and stimulate economic activity [3]. Group 3: US-China Trade Relations - Recent communications between US and Chinese officials following the Geneva talks are viewed as a positive signal for improving macroeconomic uncertainty. Enhanced relations could lead to simultaneous improvements in the economic fundamentals and risk appetite [4]. Group 4: Market Performance - The week of May 22 saw significant upward pressure on risk-free rates in the US, leading to a "risk-off" sentiment in global markets. The S&P 500, NASDAQ, and Dow Jones all recorded declines of approximately 2.5% [5]. - The Hong Kong Hang Seng Index outperformed global markets, rising by 1.1%, while A-shares showed mixed performance with a slight decline in technology stocks [5][6]. Group 5: Commodity Market Dynamics - The commodity market displayed divergence, with gold leading gains amid geopolitical risks and tightening liquidity. Gold prices rose by 5.0% for London gold and 5.6% for COMEX futures, while copper also saw a slight increase [6][7]. - Oil prices adjusted downwards, with Brent crude futures falling by 1.0% during the same period [6]. Group 6: Economic Indicators - Industrial production in May is expected to show resilience, with a year-on-year growth estimate of 5.99%, supported by export demand. The actual and nominal GDP growth rates for May are projected at 5.24% and 4.10%, respectively [14]. - Consumer price index (CPI) and producer price index (PPI) estimates indicate slight declines, with PPI expected to be -2.98% year-on-year, reflecting ongoing price pressures in the industrial sector [15][16]. Group 7: Policy Developments - The State Council approved the "Manufacturing Green Low-Carbon Development Action Plan (2025-2027)," emphasizing the need for green technology innovation and the transformation of traditional industries [24]. - The government is focusing on addressing "involution" competition to promote healthy industrial development and enhance market competition [25].

Group 1: Trade Relations and Impact - The China-U.S. trade relationship has shown signs of easing, but the future direction remains uncertain[3] - Industries with low revenue profit margins and high export exposure, such as textiles and furniture, will be significantly impacted by a 30% tariff[6] - High-margin industries with low export exposure, like pharmaceuticals and beverages, will experience limited impact from tariffs[6] Group 2: Identifying Strong Alpha Products - Strong alpha products can be identified through three perspectives: import/export dependency, resilience during previous trade tensions, and high re-export rates[3] - Traditional labor-intensive products, such as textiles and toys, maintain a global supply advantage[3] - Mid-range manufacturing products, like home appliances and electrical machinery, can mitigate trade friction effects through re-export strategies[3] Group 3: Market Dynamics and Resilience - During the 2018-2019 trade tensions, certain products, including ships and integrated circuits, showed resilience and even market share growth[9] - Re-export trade through countries like Vietnam and Mexico has played a crucial role in buffering the impact of tariffs[10] - Products with high U.S. import dependency and strong global supply advantages are less affected by U.S. tariff policies[8] Group 4: Risk Factors - Historical data extrapolation may lead to inaccuracies in predicting future impacts[11] - Unexpected changes in U.S. tariff policies could significantly alter market dynamics[11] - Increased scrutiny on origin verification may affect China's re-export capabilities[11]

Core Viewpoints - The current macroeconomic environment shows mixed signals, with some companies facing operational pressures while positive trends in consumption, industry, and capital markets are emerging [2] Employment Issues - The total number of employees in manufacturing listed companies reached 16.01 million in 2024, a year-on-year increase of 3.3%, down from 4.1% in the previous year [4][14] - Employment growth is primarily driven by the automotive manufacturing and computer communication electronics sectors, which contributed nearly all of the employment increase [4][14] Income Distribution - The average salary in the manufacturing sector is projected to be 176,000 yuan in 2024, with a year-on-year growth of 4.4%, aligning closely with the growth rate of urban residents' disposable income [5][20] - The ratio of manufacturing average salary to financial industry salary has increased, reaching its highest level since 2012, indicating a favorable environment for talent influx into manufacturing [5][20] Profitability Issues - Manufacturing companies are experiencing profitability pressure, with operating profit declining by 12.2% year-on-year in 2024, and the operating profit margin dropping from 6.6% in 2023 to 5.7% in 2024 [6][24] - The profitability pressure index for the industrial sector has risen to 10.5%, indicating increased pressure compared to 7.7% in 2023 [6][25] Investment Returns - The estimated investment return for manufacturing listed companies is approximately 5.4% in 2024, down from 6.4% in the previous year, marking a decline in absolute levels [7][33] - Despite the overall decline, certain sectors such as leather, computer communication electronics, and general equipment have shown a rebound in investment returns [7][33] Asset and Liability Issues - Total assets of manufacturing listed companies grew by 5.1% year-on-year in 2024, but the growth rate has slowed compared to previous years [8][36] - The asset-liability ratio has continued to rise, reaching 52% in 2024, indicating increasing debt levels [8][36] Cash Flow - The accounts receivable turnover days increased to 57.1 days in 2024, indicating greater collection pressure [9][45] - The growth rate of monetary funds for non-financial A-share companies turned negative at -1.9% in 2024, with manufacturing experiencing a significant decline to -2.8% [9][45] Capital Expenditure - Capital expenditure for manufacturing listed companies decreased by 11.1% year-on-year in 2024, contrasting with a growth of 3.4% in the previous year [10][48] - Newly listed companies have shown a significant increase in capital expenditure, with a growth rate of 23.7% in 2023-2024, indicating a divergence from established firms [10][48] Financing Issues - The growth rate of interest-bearing debt for manufacturing listed companies slowed to 6.8% in 2024, continuing a trend of deceleration since 2022 [11][57] - The interest burden has decreased, with the ratio of interest expenses to interest-bearing debt falling to 3.36% in 2024, indicating a reduction in debt servicing costs [11][57]

Employment Insights - The total number of employees in manufacturing listed companies reached 16.01 million in 2024, growing by 3.3% year-on-year, a slight decrease from 4.1% in the previous year[2] - The automotive manufacturing and computer communication electronics sectors contributed nearly all employment growth, adding 320,000 and 180,000 employees respectively[2] - The electrical machinery sector saw a decline of 51,000 employees in 2024[2] Income Distribution - Average salary in manufacturing listed companies was 176,000 yuan in 2024, with a year-on-year increase of 4.4%, aligning closely with the 4.6% growth in urban disposable income[3] - The ratio of manufacturing average salary to financial industry salary increased to 0.454, the highest since 2012, indicating a favorable trend for talent inflow into manufacturing[3] - The labor compensation ratio in manufacturing listed companies rose to 9.9% in 2024, the highest since 2012[3] Profitability Challenges - Manufacturing listed companies experienced a 12.2% decline in operating profit in 2024, worsening from an 11.1% decline in the previous year[4] - The operating profit margin fell from 6.6% in 2023 to 5.7% in 2024[4] - The profitability pressure index increased to 10.5% in 2024, up from 7.7% in 2023, but lower than the 15% seen in 2015[4] Investment Returns - The estimated investment return for manufacturing listed companies was 5.4% in 2024, down from 6.4% in 2023, marking a decline below 2014 levels[5] - Seven industries, including leather and computer communication electronics, saw a rebound in investment returns despite the overall decline[5] Financial Health - Total assets of manufacturing listed companies grew by 5.1% in 2024, a slowdown from 8.4% in the previous year[6] - The asset-liability ratio increased to 52% in 2024, continuing a three-year upward trend[7] Cash Flow Issues - The accounts receivable turnover days increased to 57.1 days in 2024, the second-highest since 2012, indicating heightened collection pressure[7] - The growth rate of monetary funds for non-financial A-share companies turned negative at -1.9% in 2024, a significant drop from 4.1% previously[7] Capital Expenditure Trends - Capital expenditure for manufacturing listed companies fell by 11.1% year-on-year in 2024, contrasting with a 3.4% increase in 2023[8] - Newly listed companies showed a capital expenditure growth of 23.7%, significantly higher than other firms[8] Financing Conditions - Interest-bearing debt for manufacturing listed companies grew by 6.8% in 2024, but the growth rate has been slowing since 2022[9] - The interest burden decreased to 3.36% in 2024 from 3.48% in 2023, indicating a reduction in debt pressure[9]

Manufacturing Sector - The manufacturing PMI in March increased by 0.3 points to 50.5, marking two consecutive months of improvement[3] - The number of industries in the expansion zone rose from 7 to 8, with the non-ferrous industry entering the contraction zone[3] - The computer communication and electronics sectors saw a significant recovery, with PMI values rising above 50[3] Industry Performance - In March, the computer communication electronics sector's PMI surged by 12.8 points, reaching a new high since June 2017[5] - The chemical, textile, and apparel sectors showed leading performance, while raw materials and agricultural products remained weak due to commodity price adjustments[3][5] - The pharmaceutical sector's new orders and export orders showed strong growth, with increases of 6.4% and 14.4% respectively[4] Emerging Industries - The "AI+" trend significantly boosted the performance of new generation information technology, with a PMI increase of 27.1 points[6] - High-end equipment manufacturing and new materials also saw substantial increases of 16.4 points and 9.0 points respectively[6] - The new energy vehicle sector's PMI rose by 8.1 points, reflecting the impact of supportive policies[6] Construction and Real Estate - The construction PMI rose by 0.7 points to 53.4, with residential construction showing a notable increase of 11.8 points[10] - Real estate activity indicators, including new orders and expectations, also improved, indicating a recovery in the sector[10] - The construction sector's performance remains below the levels seen at the end of 2024, particularly in residential and civil engineering[8] Service Sector - The service sector PMI increased by 0.3 points to 50.3, driven by improvements in productive services[10] - Water transportation and telecommunications sectors reported PMIs above 60, while the restaurant and ecological sectors experienced declines[11] - Financial services remained strong, supported by increased credit to private and small enterprises[10]

Core Viewpoint - The manufacturing PMI in March increased by 0.3 points to 50.5, indicating a continued improvement in the macroeconomic environment, with the number of industries in the expansion zone rising from 7 to 8 [1][5][6]. Group 1: Manufacturing Sector - The computer communication electronics industry reached a PMI close to 60, the highest since June 2017, driven by consumer upgrades and equipment renewal [1][6]. - The textile and apparel industry showed significant improvement, with related sectors like chemical fiber and plastics also performing well [1][6]. - The pharmaceutical industry saw a similar recovery compared to the previous year, with strong new and export orders [1][6][7]. Group 2: External Demand - Export orders for the computer communication electronics and textile industries increased by 10.8 and 20.7 points respectively, correlating with the rise in industry PMIs [2][8]. - Despite increasing global de-globalization, export orders remain resilient, with some industries possibly experiencing "export rush" [2][8]. Group 3: Emerging Industries - The "AI+" trend significantly boosted the new generation information technology sector, with a notable increase in high-end equipment manufacturing and new materials [2][10]. - The new energy vehicle sector saw an 8.1-point increase in PMI, reflecting the benefits of new policies [2][10]. - The emerging service industries, particularly business consulting and elder care, showed the highest PMIs, indicating strong demand driven by policy support [2][10][11]. Group 4: Construction and Real Estate - The construction PMI rose by 0.7 points to 53.4, with residential construction showing an 11.8-point increase, outperforming civil engineering and construction [3][11][12]. - The real estate sector's operational indicators, including new orders and expectations, improved in March, suggesting a recovery in the sales front [3][11][12]. Group 5: Service Sector - The service sector PMI increased by 0.3 points to 50.3, with improvements in productive service industries such as water transport and IT services [3][14]. - Financial services remained strong, supported by increased credit to private and small enterprises [3][14].