China Macro Data Preview Economic Divergence Deepens

The Chinese economy continues to experience deep divergence in May, characterized by strong AI/tech-driven exports and resilient industrial output set against weak domestic retail and property investment. Credit growth remains soft, reflecting poor domestic credit demand and slow government-led project spending.

Key Takeaways

• 1.The Chinese economy displays clear divergence: resilient external/tech-driven demand versus weak domestic demand and non-tech sectors.
• 2.Retail sales are forecast to turn negative YoY for the first time since 2023, while trade growth is expected to remain rapid.
• 3.Upstream input costs continue to drive inflation higher despite soft consumer and construction-related demand.

Table of Contents

• China: May macro data preview – economic divergence deepens
• Economic divergence likely deepened in May
• May PMIs remained resilient alongside sectoral disparity
• High-frequency indicators showed domestic demand lagged
• IP growth likely edged up, while retail sales, FAI declined
• We expect trade growth stayed strong in May
• Inflation likely climbed higher
• M2 and credit growth likely eased in May

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