China economy developing in K-shape. Industrial production outperformed in May driven by global AI boom - AI equipment growth very robust. But consumer side very weak: retail sales -0.6% YoY for May, first contraction since COVID. Youth jobless rate elevated at ~16%, home prices resumed decline creating negative wealth effect. China exporting inflation in AI/telecom equipment while traditional manufacturing slower. Policymakers not in rush to change policy.

Brief period of revenge spending after pandemic was very short-lived. Sentiment remained very weak. Even within factory production, divergence between AI equipment (robust) and traditional manufacturing (much slower/declining).