"Next week in China" fra Lundgreen's Capital

Major Data Releases:

• 15 December: China to hold press conference on national economic performance
• 15 December: China to December medium-term lending facility (MLF) scale of operations and interest rate
• 15 December: China to report November industrial production
• 15 December: China to report November level of energy production            
• 15 December: China to report November investment in fixed assets (excluding rural households)
• 15 December: China to report November real estate investments
• 15 December: China to report November total retail sales (TRS) of consumer goods
• 15 December: China to report November house price index
• 16 December: China to report October total social electricity consumption

Next week, China returns to a more typical rhythm for economic data releases with eight economic indicators and a press conference on the economy lined up.

On the consumption front, retail sales growth for November is expected to remain subdued. The 11.11 shopping festival was the month’s highlight, with total online sales reaching RMB 1.62 trillion (USD 229 billion), up 12.3 per cent year-on-year. Essential categories such as grains, oils, and personal care products posted steady gains while discretionary segments like beauty and apparel relied heavily on deep discounts to attract buyers. Home appliances emerged as the strongest performer, accounting for 16 per cent of the total, supported by national and local subsidy programs for gadget trade-ins. In contrast, auto sales remained weak. Despite solid production figures, passenger car sales are projected to decline by 7 per cent year-on-year as the near-60 per cent penetration of new energy vehicles can no longer offset the sharp contraction in fuel vehicle sales.

For investments in fixed assets, growth likely stayed soft in November. Real estate remains the primary drag, with confidence dented further by Vanke’s bond rollover incident. Financing conditions for developers remain tight while sales by the top 100 developers plunged 36 per cent against November 2024, constraining cash inflows and limiting land acquisitions and new project starts. Developers continue to prioritize project delivery over expansion. Infrastructure investment is expected to maintain a modest pace as the government’s RMB 10 trillion (USD 1.4 billion) debt-swap plan focuses on managing outstanding debt instead of injecting fresh funding for new projects. Meanwhile, manufacturing investment should sustain relatively firm growth, driven by equipment upgrades and high-tech expansion, although overall weak consumer demand and declining profitability temper expansion plans.

On the liquidity side, seasonal pressures await in December. About RMB 3.5 trillion (USD 496 billion) in interbank certificates of deposit will mature this month, coinciding with yearend rollover effects, which may temporarily strain liquidity. However, funding pressures are expected to remain manageable under the central bank’s accommodative stance. Short-term rates could see a sharper uptick by end-2025, reflecting greater cash withdrawals and holiday-related demand.

Equities were muted over the past week. As of Thursday, 11 December, the MSCI China Index fell by 2.28 per cent and the Shanghai Composite slipped by 0.76 per cent. The Shenzhen Component traded flat, while the ChiNext index managed a 1.75 per cent gain. Large-cap stocks continued to outperform, with growth names maintaining a slight lead over value peers. The Shanghai Composite consolidated within a narrow range while turnover in both the Shanghai and Shenzhen indices remained largely stable, signalling firm investor sentiment. With ample liquidity and stimulus programs gradually taking effect, A-shares have retained their value.

In the near term, sectors with strong policy backing and high elasticity, such as telecommunications, electronics, and electrical equipment, warrant close attention. 

This piece has been co-produced with Yiyi Capital Limited in Hong Kong, a China specialist and a part of a global financial services group.

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