"Next week in China" fra Lundgreen's Capital

Major Data Releases:

• 12 January: China to report December M0, M1 and M2 money supply growth rates
• 13 January: Hong Kong to report December business situation of small and medium-sized enterprises
• 14 January: China to report December trade balance
• 14 January: China to report December imports and exports growth rates

It will be relatively quiet on the data front as the holiday season winds down, with only a handful of releases scheduled for mainland China and Hong Kong.

On the monetary side, December M2 or money supply growth is projected at 7.9 per cent, slightly lower than the previous reading of 8 per cent, reflecting subdued credit conditions and weak financing demand from the real economy. This has dampened deposit creation, weighing on overall liquidity growth. Meanwhile, falling bank deposit rates and a relatively resilient equity market have prompted households to shift funds toward non-bank financial products, further reducing deposits within the banking system.

M1 liquidity growth is expected to slow down, easing from 4.9 per cent to 3.9 per cent. As M1 primarily captures corporate demand deposits and highly liquid funds, its decline signals cautious business activity and tighter capital turnover intentions. Amid uneven recovery in demand and profitability at yearend, China-based firms appear focused on improving capital efficiency as they reallocate funds from low-yield demand deposits to time deposits and quasi-deposit instruments. Seasonal factors such as fiscal revenue and expenditure cycles, tax payments, and intensified yearend settlements are likely to temporarily reduce corporate demand deposits, adding volatility to M1 readings.

Looking at trade, December exports are estimated to rise 3.9 per cent, with imports up 1.4 per cent. The high base effect due to frontloaded shipments in 2025 ahead of hefty US tariffs continues to exert pressure on current readings. Global monetary and fiscal expansion in 2026 should underpin external demand, with non-developed markets providing a key source of resilience. Full-year export growth is projected at 6.6 per cent, slightly stronger than 2025. China’s market share in emerging economies has expanded notably, with exports accounting for 42.8 per cent of Africa’s imports, 25.6 per cent in Latin America, and 23.2 per cent in the Middle East between January-August 2025, all higher than 2024 levels. Recent rate cuts in the US and Europe have created room for monetary easing in developing economies, further supporting global trade momentum.

Equities were mixed over the past week, although generally positive. As of Thursday, 8 January, the MSCI China Index stood flat, sliding by 0.03 per cent versus last Friday’s close. The Shanghai Composite and Shenzhen Component indices gained 2.88 per cent and 3.21 per cent, respectively; and the ChiNext Index picked up by 3.1 per cent. Mid- and large-cap stocks continued to outperform, with growth names leading value peers. Policy support remains a key driver. The National Development and Reform Commission released its 2026 advance list of “Two Heavy” construction projects and the central budget investment plan, totaling about RMB 295 billion (USD 42.2 billion). Meanwhile, the “Two New” policy will be extended and optimized, with the first batch of RMB 62.5 billion (USD 8.9 billion) in subsidies allocated in advance. These measures are expected to sustain a healthy upward trend in China’s domestic market.

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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