"Next week in China" fra Lundgreen's Capital

Major Data Releases:

• 18 May: China to hold press conference on national economic performance
• 18 May: China to report April industrial production for firms above the designated size
• 18 May: China to report April energy production
• 18 May: China to report April investments in fixed assets (excluding rural households)
• 18 May: China to report April real estate sales
• 18 May: China to report April total retail sales (TRS) of consumer goods
• 18 May: China to report April housing price index
• 20 May: China to report May 1-year and 5-year loan prime rates (LPR)

The pace of major data releases for China will pick up in mid-May, with April activity indicators and the setting of benchmark interest rates out next week.

We expect April’s retail sales’ year-on-year growth to improve modestly to around 2.5 per cent from 1.7 per cent in March, though the overall signal still points to soft consumption momentum. Excluding autos, retail sales rose 3.2 per cent in March, suggesting that day-to-day household spending has remained relatively stable. The Qingming Festival and spring travel likely provided some support to catering, tourism, and transport-related spending in April, but broader demand for services appears to have remained soft beyond holiday activities. Auto sales remain the key swing factor: the China Passenger Car Association reported April passenger-car retail sales at 1.42 million units, down 13.8 per cent month-on-month, while new-energy vehicle sales were expected to reach 860,000 units and maintain a high penetration rate. Although EV demand remains relatively resilient, overall auto sales remain unlikely to contribute materially to TRS growth. The government’s trade-in and durable-goods replacement programs should continue to underpin sales of appliances, digital products, and vehicles, but weak household income expectations and still-fragile balance sheets are likely to keep any consumption rebound modest.

On fixed asset investment, cumulative growth for January to April is expected at 1.5 per cent year-on-year, with infrastructure support, moderating manufacturing momentum, and persistent property weakness still in place. Manufacturing investment is likely to remain around 4 per cent, supported by equipment upgrades, expansion in high-tech manufacturing, and ongoing digital transformation. However, weaker new orders, uneven profit recovery, and higher upstream costs are likely to cap further acceleration. Infrastructure remains the most stable pillar, with cumulative growth expected at 8 per cent. Frontloaded fiscal spending, special local-government bond issuances and policy support from government programs should continue to provide a backstop. Yet, the construction business activity index fell to 48.0 in April and the new orders index to 41.6, suggesting that policy funding has yet to translate fully into stronger physical workload. Hence, infrastructure investment is more likely to remain firm without any sharp acceleration. Real estate is still the main drag: although some cities saw modest improvements in sales and property prices in April, recovery has been concentrated in core areas and the second-hand market. This remains insufficient for developers to increase land purchases, housing starts, or construction activity at a meaningful level. Property investments for January-April are therefore expected to remain around -11.5 per cent.

For interest rates, the probability of a cut to either the policy rate or the reserve requirement ratio in May appears low. LPR settings have remained unchanged so far this year, reflecting a relatively solid start to 2026 with stronger exports, improving domestic investment, firmer consumption, and continued growth in high-tech manufacturing. Monetary policymakers remain in observation mode given limited need for near-term macroeconomic support. Central bankers may place greater emphasis on supporting the property market in the second half of the year, potentially through a larger reduction in the five-year LPR alongside interest subsidies to lower mortgage costs further.

Equity market performance was mixed over the past week. As of Thursday, 14 May, the MSCI China Index was down 0.68 per cent while the Shanghai Composite fell by 0.05 per cent. The Shenzhen Component and ChiNext indices outperformed, gaining 1.17 per cent and 4.08 per cent, respectively. Large-caps slightly outperformed small- and mid-cap peers, while growth stocks were modestly ahead of value peers.

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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