Chief China Economist on K-shaped recovery and policy outlook (with Yvonne Man, April Hong)

Helen Chow views the June PMI as marginally positive but not a game-changer, confirming a K-shaped recovery where supply/exports are strong but domestic demand is weak. She believes policymakers lack urgency for major stimulus unless Q2 data shows significant deceleration. She expects more easing in H2 but not immediately, and sees trade frictions with EU/Japan as a bigger risk than US-China tensions.

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Helen Chow 8.5

Chief China Economist on K-shaped recovery and policy outlook (with Yvonne Man, April Hong)

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Her focus is on domestic Chinese policy and trade frictions, not on a strong directional view of the dollar.

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She notes that lower oil prices would help China by reducing energy inflation and improving terms of trade, implying an expectation or hope for a decline.

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She expects no immediate rate cut from the PBOC, suggesting a period of stable policy rates in the near term.

Yvonne Man

Asks for her take on the marginally improving PMI data.
Helen Chow

The PMI is a good message, showing manufacturing and services holding up, but it doesn't tell the full story. The real question is on the demand side (consumption and investment).
Yvonne Man

Asks if the data is soft enough to prompt policy action.
Helen Chow

She is skeptical of immediate big stimulus. The urgency is low because Q2 GDP is likely still around 5%, and policymakers need to see a significant deceleration before pulling out 'big cannons'.
Yvonne Man

Asks about the K-shaped recovery and whether it's only about AI and semis.
Helen Chow

She agrees the market only cares about AI, but for EM Asia, growth is diverging. Tech exporters (Taiwan, Korea) are front-runners, while domestic-demand-oriented economies in SE Asia struggle with high oil prices.
April Hong

Asks about the structural vs. transient nature of China's energy shifts, given lower-than-expected oil import demand.
Helen Chow

China is better prepared for high oil prices due to large strategic reserves, diversified energy sources, and significant development of renewable energy. Lower oil prices would help China by reducing energy inflation and improving terms of trade.
April Hong

Asks what needs to happen for 'good inflation' and a rebalancing of the economy towards domestic demand.
Helen Chow

The key is to close the supply-demand gap. She holds a 4.5% GDP forecast for the year, driven by exports (15% nominal growth). Hopes for rebalancing have been dashed.
Yvonne Man

Asks if the strong supply/export side could delay stimulus, and whether the July Politburo meeting could be a catalyst.
Helen Chow

She is skeptical of immediate big stimulus. The urgency is low because Q2 GDP is likely still around 5%, and policymakers need to see a significant deceleration before pulling out 'big cannons'.
April Hong

Asks if this means no monetary easing is expected.
Helen Chow

More policy easing (monetary and fiscal) is needed, but she doesn't expect an immediate rate cut. Policymakers will take time to assess the deceleration. Risks are that exports decelerate in H2, which would create more urgency.
Yvonne Man

Asks about the PBOC's new overnight reverse repo tool and the lack of clarity around its signaling.
Helen Chow

The message is unclear. The PBOC still emphasizes the 7-day repo rate as the key policy rate, so an overnight move without a 7-day move is confusing. The low-profile approach limits signaling impact on household and corporate balance sheets.
April Hong

Asks about the biggest risk for the Chinese economy in H2, specifically trade frictions with the EU and Japan.
Helen Chow

US-China trade environment is getting better due to leadership meetings. However, EU and Japan are bigger risks, with potential for higher tariffs and trade barriers. She doesn't think China will retaliate aggressively as it depends on exports and wants to maintain an open image.

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