Group 1: PMI Data Overview - In June, the manufacturing PMI, non-manufacturing PMI, and composite PMI output indices were 49.7%, 50.5%, and 50.7%, respectively, with month-on-month increases of 0.2, 0.2, and 0.3 percentage points[2] - The manufacturing PMI has remained below the boom-bust line for three consecutive months, indicating ongoing economic pressure[3] - Non-manufacturing PMI showed resilience, particularly in the construction sector, which saw significant growth driven by residential and construction engineering[3] Group 2: Production and Demand Insights - Production and demand both rebounded, with demand rising above the boom-bust line, and the increase in demand outpacing production[4] - New orders increased by 0.4 percentage points to 50.2, new export orders rose by 0.2 percentage points to 47.7, and existing orders improved by 0.4 percentage points to 45.2[4] - Raw material inventory continued to rise, with the inventory of finished products significantly increasing by 1.6 percentage points to 48.1[5] Group 3: Price and Profitability Trends - Price indices rebounded for the first time since February, with the purchasing price index rising by 1.5 percentage points to 48.4, while the factory price index also increased by 1.5 percentage points to 46.2[5] - Despite the price increases, profit pressures for enterprises have not improved, indicating ongoing challenges in profitability[5] Group 4: Sector Performance - In the manufacturing sector, 6 out of 15 industries (40%) were in a prosperous range, an increase from 4 in May, with notable performance in petroleum processing, chemical fiber, and electrical equipment[6] - In the non-manufacturing sector, 10 out of 19 industries (53%) were in a prosperous range, a decrease from 13 in the previous month, with strong performance in postal services and civil engineering[6]

Report Industry Investment Rating No relevant content provided. Core Viewpoints - The domestic economy is in a stage of phased recovery of internal and external demand, driving the PMI index to repair upward for two consecutive months [5][11][25]. - In the third quarter, the economic fundamentals still face several pressures, including the potential drag of high - temperature weather on production, the risk of demand decline as the driving force of reduced external uncertainties weakens, and the market's pessimistic outlook on the future fundamentals reflected by the decline of business operation expectations and employment indexes [5][25]. - Whether the existing policies can be implemented faster and whether the Politburo meeting in July can provide new incremental information may be important catalysts to help the bond market break the current volatile pattern [5][25]. Summary by Directory 1. Demand Repair Drives Strong Production - The demand index rose to the expansion range for the first time since the intensification of trade frictions in March, with the new order index rising 0.4 points, and the increase was greater than that of production, indicating the effect of domestic demand expansion policies and the dual suppression of production by seasonality and unclear demand prospects [3][11]. - The rebound of domestic demand may be mainly driven by national subsidies and the "618" shopping festival, with a fragile structure, and the decline of the employment index also reflects this [11]. - The new export order index's upward slope slowed down significantly, and the export replenishment based on the easing of trade frictions may be nearing the end, and external demand may face a quarterly decline in the second half of the year [3][16]. - High - temperature weather in July - August may further drag down manufacturing production [11][12][13]. 2. Price Index Moderate Repair - The raw material price index and the ex - factory price index increased by 1.5 points respectively compared with the previous month. The rise of the raw material price index may be related to the increased geopolitical risks leading to greater fluctuations in international crude oil prices, and the increase in oil prices is transmitted to other raw material prices through transportation costs [4][19]. - The repair of the downstream price index may be related to the temporary suspension of national subsidies in some regions. After the central funds for trade - in are issued in July, the price trend of terminal products needs further attention [4][21]. 3. Strong Recovery in the Construction Industry - The drag of real estate on the construction industry has weakened. The construction industry PMI index rose 1.8 points to 52.8 this month, and the business activity index of housing construction returned to the expansion range [5][22]. - The business activity index of civil engineering construction was 56.7%, down 5.6 points from the previous month, but it has been in the high - prosperity range above 55.0% for three consecutive months, indicating that infrastructure is still the main force for the expansion of the construction industry [22]. - After the holiday effect fades, the consumer service industry has a seasonal decline, while the producer service industry is relatively strong [25].

Core Viewpoint - The article discusses the growth of China's goods trade surplus and current account surplus, highlighting the impact of economic structure optimization, competitive manufacturing, and recovering external demand on these surpluses [2]. Group 1: Goods Trade Surplus Growth - China's goods trade surplus is a result of deep participation in global industrial division and cyclical fluctuations in external demand [3]. - The long-term surplus is influenced by the global shift in industrial chains, with labor-intensive industries moving to developing countries, while developed nations focus on higher-end products and services [3]. - In 2024, China's goods trade surplus is projected at $768 billion, with foreign-invested enterprises accounting for 27% of total exports, and processing trade surplus contributing 21% to the overall trade surplus [3]. Group 2: External Demand Fluctuations - External demand has shown significant volatility, influenced by global economic developments and international financial market fluctuations [4]. - From 2020 to 2022, major developed economies' quantitative easing led to a 12% annual growth in China's exports, while tightening monetary policies in 2023 resulted in a 5% decline [4]. - A rebound in global manufacturing and semiconductor consumption is expected to drive a 7% increase in exports in 2024 [4]. Group 3: Current Account Balance - The current account is a comprehensive indicator of a country's internal and external economic balance, considering factors like service trade and investment income [6]. - China's current account surplus is projected at $423.9 billion in 2024, reflecting a 45% reduction compared to the goods trade surplus alone [6]. - The current account surplus to GDP ratio is expected to be 2.2% in 2024, indicating a stable economic balance compared to other countries like Japan and Germany [7]. Group 4: Future Outlook - The development of trade surpluses is closely linked to domestic economic adjustments, global supply chain layouts, and changes in internal and external demand [8]. - With ongoing policies to stabilize foreign trade and domestic demand, China's exports and imports are anticipated to maintain steady growth, keeping trade and current account surpluses within reasonable ranges [8].