"Next week in China" fra Lundgreen's Capital

Major Data Releases:

• 17 August: China to hold press conference on national economic performance
• 17 August: China to report July industrial production
• 17 August: China to report July energy production
• 17 August: China to report July fixed asset investment (excluding rural households)
• 17 August: China to report July home sales and prices
• 17 August: China to report July total retail sales (TRS) of consumer goods
• 20 August: China to report August 1-year and 5-year loan prime rates (LPR)

Major data releases for China markets this week will centre on July activity indicators and August interest rates.

For retail sales, we expect July growth to slow to 0.8 per cent year-on-year. The services PMI fell by 1.1 percentage points to 49.3 in July, pointing to weaker momentum. High-frequency indicators also suggest a mixed picture: on the goods side, auto sales remained the main drag with national passenger vehicle retail sales down 13 per cent from June and 18 per cent lower from July 2025. Cumulative vehicle sales totalled 9.824 million units so far this year, down 20 per cent year-on-year. On the services side, metro traffic was broadly in line with seasonal patterns while domestic flights were above seasonal levels, suggesting some recovery in travel intensity. Summer box-office revenue was also broadly seasonal, led mainly by top films, though lower ticket prices indicate some “price-for-volume” behaviour. Overall, we expect TRS growth to remain subdued, with forecasts of 0.7 per cent for August and 0.5 per cent in September.

For fixed asset investment, we expect a year-on-year decline of 5.9 per cent in July. Infrastructure investment is likely to remain weak as new special-purpose bond issuances for project construction was below expectations amid a continuing shortage in investable projects. Extreme weather conditions in some regions also slowed construction progress. The construction PMI fell by 2 percentage points to 47 in July, the lowest in nearly a decade, while cement and rebar prices both moved lower. Property investment is also likely to stay depressed. Recent state policy meetings have offered limited new guidance to the sector, with the July Politburo meeting only referring to the need to “stabilise the real estate market.” In the near term, developers’ credit repair and willingness to invest remain weak. Manufacturing investment may soften as well, as the new orders PMI fell by 2.7 percentage points to 48.5. Corporate expectations were mixed: the manufacturing PMI business activity expectations index edged down to 54.1 while the China Enterprise Business Conditions Index rose to 50.08. We expect cumulative fixed asset investment growth to improve slightly to -5.2 per cent and -4.8 per cent in August and September, respectively.

For monetary policy, we see a low likelihood of changes to LPR rates or the reserve requirement ratio for large financial institutions in August.

Chinese equities delivered mixed performance over the past week. As of Thursday, 13 August, the MSCI China Index was down 2.24 per cent while the Shanghai Composite fell 0.33 per cent. The Shenzhen Component slipped 0.15 per cent and the ChiNext rose by 0.64 per cent. Small caps continued to slightly outperform mid- and large-cap peers, while value shares modestly outpaced growth.

Recently, A-shares have undergone a period of rebalancing. Market leadership has broadened from the first-half dominance of upstream AI-related sectors to a more diversified pattern: healthcare, non-ferrous metals, consumer, and other sectors strengthened. Meanwhile, performance among technology stocks has become more differentiated. This rebalancing reflects a temporary convergence in style as existing capital rotates from crowded winners towards laggards but does not signal the end of the growth theme nor mark the start of a broad value-led rally. The A-share market may continue to rebound in the near term. As autumn trading moves into the positioning phase, the market has shifted from a technology-crowded trade towards multiple allocation themes unfolding in parallel.

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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