"Next week in China" fra Lundgreen's Capital

Major Data Releases:

• 1 June: RatingDog to report May Manufacturing Purchasing Managers’ Index (PMI)
• 2 June: Hong Kong to report April retail sales statistics
• 3 June: RatingDog to report May Services PMI
• 5 June: Taiwan to report May Consumer Price Index
• 5 June: Taiwan to report May Producer Price Index (PPI)
• 5 June: Macau to report February-April 2026 residential property price index
• 7 June: China to report May foreign exchange reserves level
• 7 June: China to report May gold reserves level

The first week of June will remain relatively quiet in terms of major economic data releases for China markets.

For the May manufacturing PMI, we expect a modest pullback from April’s reading. While the official PMI was already discussed in a previous article, the RatingDog PMI is also worth close attention given its different sample composition. It puts more weight on small and medium-sized enterprises (SMEs) and export-oriented manufacturers, with greater representation from coastal regions. As a result, it is generally more sensitive to changes in market vitality and external demand. February provided a clear example of this divergence: the official manufacturing PMI stood at 49.0 against RatingDog’s 52.1 reading.

In April, the RatingDog Manufacturing PMI came in at 52.2, up from 50.8 previously, marking the fifth consecutive month above the 50.0 expansion-contraction threshold. That said, the latest recovery continues to exhibit characteristics of a “jobless recovery”, with the employment sub-index slipping back into contraction territory and diverging from the stronger performance seen in both production and demand. According to manufacturers, the increase in new orders was driven by firmer customer demand, improved market conditions, and the launch of new products, while broader sales channels also provided additional support.

Input prices rose further in April, contributing to a faster increase in consumer prices. In our view, this reflected both the policy-led repricing seen since 2025 to curb excessive price competition and imported inflationary pressures that have intensified since March amid geopolitical tensions. At the same time, the simultaneous improvement in both volumes and prices has supported business confidence to expand production and rebuild inventories at the production side. However, overall employment conditions were broadly flat in April following sustained expansion through the first quarter. Employment increased among consumer goods producers but declined slightly among manufacturers of intermediate and investment goods, reinforcing the view that current improvements in business conditions remain more concentrated on the supply side. A broader-based recovery will still require firmer downstream consumer demand and further recovery in household balance sheets. Meanwhile, the latest Emerging Industries PMI showed output and new orders components easing back to 56 and 54, respectively, widening the gap between production and demand, while export orders declined to 50.3 though still relatively higher in recent years. Overall, we expect the May RatingDog PMI to slightly ease from April’s level while remaining broadly consistent with continued expansion.

Equity market performance mixed over the past week. As of Thursday, 28 May, the MSCI China Index was down 2.07 per cent, while the Shanghai Composite declined by 0.35 per cent. The Shenzhen Component and ChiNext indices rose 1.7 per cent and 4.74 per cent, respectively. Large-cap stocks continued to slightly outperform their small- and mid-cap peers, while growth shares modestly outpaced value. Looking ahead, current economic growth continues to be driven mainly by resilient exports and ongoing policy support as the contribution from domestic demand remains comparatively subdued. Retail sales growth has stayed moderate and underlying price signals remain mixed, suggesting that consumer confidence and the balance between supply and demand still require further improvement.

Looking into the second half of 2026, as PPI readings turn positive and translate into improving corporate earnings along with continued policy support, the recovery in A-share earnings should gradually gain momentum. Also, earnings dispersion across sectors may become even more pronounced, particularly between upstream resource industries, the exports supply chain, technology, and downstream consumer segments. In that context, the market’s structural characteristics are likely to remain prominent, reinforcing the case for staying focused on core thematic opportunities within the equities 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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