"Next week in China" fra Lundgreen's Capital

Major Data Releases:

• 2 March: RatingDog to report February Manufacturing Purchasing Managers’ Index (PMI) for China
• 4 March: National Bureau of Statistics of China to report February PMI readings
• 4 March: RatingDog to report February Services PMI for China
• 4 March: Hong Kong to report January retail sales statistics
• 5 March: Hong Kong to report Q4 2025 trade statistics on vessels, port cargo and containers
• 5 March: China opens the annual session of the 14^th National People’s Congress
• 6 March: Taiwan to report February Consumer Price Index (CPI)
• 6 March: Taiwan to report February Producer Price Index (PPI)
• 7 March: China to report February foreign exchange reserves level

China’s data calendar will normalise next week as markets return from the Spring Festival break, placing renewed attention on the upcoming PMI releases and agenda-setting for the Chinese economy’s way forward.

Beyond near‑term indicators, focus will also turn to the Fourth Session of the 14^th National People’s Congress (NPC). The meeting will review the Government Work Report, which will assess China’s economic and social performance in 2025 and outline major policy objectives for 2026 – including targets for GDP growth, employment, inflation, and social welfare.

As the first major political event of the 15^th Five Year Plan period that spans from 2026 to 2030, the NPC will also examine the draft outline of the new Five‑Year Plan. This document is expected to define China’s strategic direction in technological innovation; industrial upgrading; regional coordination; and green, low‑carbon development. It will shape medium‑ to long‑term strategies and guide progress towards the goal of doubling the size of China’s economy by 2035. Considering recently announced local government targets, current macroeconomic trends, and expected policy priorities, the GDP growth target for 2026 is likely to be set near 5 per cent. The fiscal deficit ratio may be guided towards roughly 4 per cent, and the inflation target set around 2 per cent.

February PMI readings will reflect the extended holiday period, which included one additional day off this year. Manufacturing PMI is expected to decline further from January’s 49.3 as the production index weakens. The Emerging Industries PMI (EPMI) fell 5.4 points month-on-month to 44.6 in February, though seasonality was the main driver. This year’s decline was milder than in 2021 and roughly in line with 2024. Mid‑cycle industry momentum has softened, with only the new energy sector among the seven major sub‑industries in expansion territory. A positive development within the February EPMI was the improvement in pricing conditions. Despite seasonal weakness in production and demand indicators, price indices rose, signalling underlying resilience and potential opportunities for price‑driven segments.

February’s production contraction will also result in lower inventories for both producers and end‑users, setting up a smoother post‑holiday rebound in March. Prior to the Lunar New Year holiday, technological breakthroughs and sector-specific optimism had bolstered sentiment. After the break, easing measures in major city property markets, led by Shanghai, indicate improving fundamentals for some traditional sectors. Investors will look closely at the speed and trajectory of the March recovery in investment and production.

Equity market performance recovered post-holiday. As of Thursday, 26 February, the MSCI China Index was down 1.13 per cent, an index that stayed open through the season. The Shanghai Composite rose by 1.58 per cent, the Shenzhen Component gained 2.86 per cent, and the ChiNext Index added 2.11 per cent. Small‑ and mid‑cap stocks again outperformed large caps, and growth sectors led value. In the near term, markets may remain broadly stable with a slight upward bias, supporting selective participation in structural themes. However, given current macro conditions, policy stance, and external factors, a shift into a sustained bull trend appears unlikely. A‑shares are expected to trade within a wide consolidation range, with clear sectoral divergence, until a market‑driven catalyst and a definitive leading group can emerge.

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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