"Next week in China" fra Lundgreen's Capital

Major Data Releases:

• 15 July: China to hold press conference on national economic performance
• 15 July: China to report June industrial production
• 15 July: China to report June energy production
• 15 July: China to report June investment in fixed assets (excluding rural households)
• 15 July: China to report June home sales
• 15 July: China to report June total retail sales (TRS) of consumer goods
• 15 July: China to report June housing price index
• 15 July: China to report Q2 2026 households’ income and consumption expenditure
• 15 July: China to report Q2 2026 industrial capacity utilization rate
• 16 July: China to report Q2 2026 value added of major industries

Next week will bring a relatively heavy slate of macroeconomic data for China markets, with June activity indicators and second-quarter economic data the main calendar items.

We expect June retail sales to decline by around 1 per cent year-on-year. In May, domestic consumption momentum weakened further with TRS falling 0.6 per cent to RMB 4.11 trillion (USD 605 billion) and growth slowing by 0.8 percentage points from April. The main drag came from the six major trade-in categories given last year’s high base and the tapering of subsidies, which weighed on demand. Retail sales of gold, silver and jewellery fell 8.9 per cent year-on-year, reflecting gold price volatility and stronger precautionary saving behaviour, while passenger vehicle sales dropped by 16.1 per cent as weaker subsidies and more cautious household spending constrained demand for big-ticket items. Catering revenue rose only 0.6 per cent, with lower high-end gathering and business banquet spending offsetting still-positive offline dining activity. Although the 618 shopping festival, Dragon Boat Festival holiday, and summer consumption may provide some support, the mix of weaker e-commerce promotions, declining auto sales, abnormal weather, and pressure from property-related consumption are likely to keep retail sales in contraction.

Fixed asset investment is also expected to remain subdued for June, which we estimate to drop by 4.9 per cent year-on-year in January-June. In the first five months of 2026, investment declined by 4.1 per cent to mark a big retreat. Infrastructure investments rose by 0.6 per cent year-on-year but slowed sharply as the handover between old and new projects weakened, traditional infrastructure expansion moved towards late stages, and fund disbursements slowed temporarily. Manufacturing investment slipped 0.4 per cent with weak downstream demand and slower profit recovery dragging traditional sectors like pharmaceuticals and general equipment. High-tech investment remained more resilient, with aviation, spacecraft, and equipment manufacturing; computer and office equipment manufacturing; and information services posting double-digit expansions. Real estate investment remained the largest drag, falling 16.2 per cent year-on-year in May as developers continued to prioritise project delivery, debt-risk resolution, and inventory destocking over new land purchases and project starts. Further policy support, including RMB 800 billion (USD 117.8 billion) in policy-based aid, will be a key area to watch.

Chinese equities generally softened over the past week. As of Thursday, 9 July, the MSCI China Index was up 3.18 per cent to mark a continued recovery from past declines. The Shanghai Composite was down 0.17 per cent, while the Shenzhen Component and ChiNext indices fell by 1.27 per cent and 0.04 per cent, respectively. Large-cap stocks outperformed small and mid-cap peers, while growth shares slightly outpaced value.

Looking ahead, the June-July interim results window may put valuation pressure on small-cap names, and high-valuation pockets could see sharper pullbacks if earnings fall short of expectations. For the second half of 2026, we expect the slow bull trend at the index level to continue, although range-bound trading is likely to remain. The key market driver may shift from valuation expansion to earnings delivery. Although the AI supply chain remains the most visible medium- to long-term theme, stock selection is likely to move from capex expectations towards evidence of orders and earnings. Growth may provide an advantage in the third quarter while the fourth quarter could open a window for rebalancing, with interim results serving as the first key test.

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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