"Next week in China" fra Lundgreen's Capital

Major Data Releases:

• 20 July: China to host World Artificial Intelligence Conference from 17-20 July
• 20 July: China to set 1-year and 5-year loan prime rates (LPR) for July
• 21 July: Hong Kong to report June Consumer Price Index (CPI)
• 22 July: Taiwan to report June employment statistics
• 24 July: Macau to report June CPI

Next week will be relatively quiet in terms of China’s macroeconomic data releases as the market approaches month end, leaving policy signals, thematic catalysts and market rotation as the main areas to watch.

Attention will be directed towards the 2026 World Artificial Intelligence Conference in Shanghai, which is expected to chart the direction of global AI governance and industrial integration. The event captures AI’s transition from a pure technology tool into a collaborative partner, with discussions likely to focus on international standard-setting, AI-native ecosystems, application scenarios, and technological breakthroughs. The Superior AI Leader or SAIL Award shortlist may also help identify areas where investors see stronger evidence of commercialisation, particularly for AI agents, embodied intelligence, computing infrastructure and urban applications.

For interest rates, we expect the probability of a July adjustment to remain low. However, the broader direction of policy is still easing-biased. On 17 June, Governor Pan Gongsheng announced at the Lujiazui Forum that the People’s Bank of China would further refine its short-term interest rate operating framework, narrow the short-term rate corridor to 50 basis points, and add overnight reverse repo operations when needed. This marked another step towards a more price-based monetary policy framework. The Q1 Monetary Policy Implementation Report also continued to emphasize a moderately accommodative stance and ample liquidity. With conditions for reserve requirement ratio and policy rate cuts becoming more mature, and government bond supply likely to peak in the third quarter, the probability of easing in the second half of 2026 has increased.

The first semester also showed a more pronounced K-shaped market structure in China, with technology remaining strong while domestic demand segments staying weak. This divergence has increasingly been reflected in the credit cycle: bank lending has continued to concentrate in policy-supported technology sectors, while mortgage, non-housing consumer, and real estate development loans have contracted. Technology loans have reportedly grown by around 28 per cent year-on-year, far higher than the overall loan growth rate of 6 per cent in the first quarter.

Funding conditions for hard-tech companies appear particularly loose. One underwater robotics company said its bank lending rate had fallen from 4-5 per cent two years ago to around 2 per cent currently, and to just above 1 per cent after fiscal interest subsidies for some loans. Several hard-tech companies have also indicated that liquidity is ample and that borrowing costs are generally below comparable LPR levels. This reflects both policy support and stronger competition among banks in an “asset shortage” environment. Major banks have accelerated this shift. By end-March 2026, technology loan balances at the six large state-owned banks had all reached the trillion-yuan level, with both the Industrial and Commercial Bank of China and the China Construction Bank each exceeding RMB 6 trillion (USD 885.8 billion) in credit lines to tech companies.

Chinese equities softened over the past week. As of Thursday, 9 July, the MSCI China Index was up 2.53 per cent, while the Shanghai Composite was down 2.85 per cent. The Shenzhen Component and ChiNext indices also fell by 3.71 per cent and 3.91 per cent, respectively. Large caps continued to outperform small and mid-cap peers, while value shares outpaced growth. A-share trading has remained range-bound and volatile, with the technology sector under pressure and sharp divergence within the AI value chain. As tech volatility has risen, capital has started to rebalance toward traditional sectors with resilient earnings, stable operations, and compressed valuations. Even so, AI’s position as the strongest cyclical-growth theme remains intact, although stock selection is likely to depend increasingly on evidence of orders, earnings delivery, and commercial traction rather than momentum alone.

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.

Indholdet er udarbejdet sammen med vores samarbejdspartner, men repræsenterer vores egne holdninger og vurderinger. Indholdet skal udelukkende opfattes som af informativ karakter, og ikke som en opfordring, eller anbefaling, til at købe eller sælge værdipapirer eller andre finansielle instrumenter.

Indholdet er også offentliggjort på app'en Lundgreen's Investor Insights, som kan downloades gratis. Her finder man meget andet spændende content, bl.a. også vores egen podcast.