"Next week in China" fra Lundgreen's Capital

Major Data Releases:

• 19 January: China press conference on Q4 2025 national economic performance
• 19 January: China reports December industrial production for firms above the designated size
• 19 January: China reports December energy production levels
• 19 January: China reports December investment in fixed assets (excluding rural households)
• 19 January: China reports December real estate development and sales
• 19 January: China reports Q4 2025 households’ income and consumption expenditure
• 19 January: China reports Q4 2025 industrial capacity utilization rate
• 19 January: China reports December home prices
• 20 January: China reports preliminary data on value added of major industries for Q4 2025
• 20 January: China reports January 1-year and 5-year loan prime rates (LPR)

Mid-January ramps up to a busy week of major data releases for mainland China as markets gather the final pieces to close out 2025 and assess how economies fared.

Total retail sales of consumer goods for December is expected to rise 1.8 per cent year-on-year. Services consumption remained subdued given the offseason effect and a high base from December 2024, weighing on overall retail momentum. Industry indicators point to contractions across retail, accommodation, catering, and cultural entertainment sectors, signaling weak business activity. Automobile sales were notably soft last month, with passenger car sales down 17 per cent year-on-year, while lower prices of domestic refined oil further dampened petroleum-related consumption. With earlier consumption stimulus policies phased out, the market is reverting to normal seasonal purchasing patterns driven by fundamentals. Commodity housing sales rebounded on a monthly basis as developers accelerated project launches and promotions at yearend, which also likely supported demand for home furnishing products.

December fixed asset investments are projected to decline by 3.3 per cent year-on-year, the drop wider by 0.7 percentage points from November. Infrastructure investment showed marginal improvement, aided by narrower fiscal spending declines and higher shipment rates of asphalt and cement. Real estate investment contraction persisted as second-hand housing sales fell further and land transactions remained muted. Manufacturing investment continues to face pressure from weak profits, the latter declining by 13.1 per cent in November. Structural divergence remains evident: equipment and high-tech manufacturing sectors are outperforming, supported by ongoing digital transformation and AI adoption. This may gradually underpin investment in new manufacturing drivers.

The People’s Bank of China announced a 0.25 percentage point reduction on relending and rediscount rates effective 19 January 2026, bringing the 1-year relending rate to a historic low of 1.25 per cent. This reduces banks’ funding costs and adds downward pressure on the benchmark LPR. Additional easing measures, such as a reserve requirement ratio cut, are anticipated in the first quarter to complement this policy shift to lift domestic growth.

Equities were mixed over the past week. As of Thursday, 15 January, the MSCI China Index rose by 1.91 per cent, while the Shanghai Composite slipped by 0.19 per cent. The Shenzhen Component and ChiNext indices advanced by 1.32 per cent and 1.21 per cent, respectively. Small- and mid-cap stocks continued to outperform, with growth names leading value peers. The A-share market often exhibits a seasonal “spring rally” pattern from yearend through the first quarter, driven by early positioning ahead of macroeconomic policy signals, thematic investment hotspots, and seasonal capital inflows. Meanwhile, earnings vacuum before annual financial reports are released further supports market optimism, creating a favourable backdrop to build momentum.

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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