China economic data and outlook (with Yvonne Man, David Ingles)

China's May data shows weakness: retail sales contracting 0.2% (first since COVID reopening), fixed asset investment declining for second straight month. Only industrial production is accelerating due to AI-related export demand. Infrastructure spending on data centers, power grid, water networks expected to pick up in H2.

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China economic data and outlook (with Yvonne Man, David Ingles)

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AI-related export demand boosting industrial production suggests continued strength in tech sector, though domestic consumption weakness may limit upside.

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Industrial production is the only metric expected to accelerate, boosted by export demand from AI-related sectors like chips and computers.
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Retail sales expected to contract 0.2%, first time since COVID reopening in 2022, partly due to payback after government subsidies pulled forward purchases of home appliances and cars.
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Fixed asset investment expected to decline for second straight month due to bad weather (heatwave, heavy rain) and slower bond issuance, but could pick up in H2 with government infrastructure spending on six networks including data centers and power grid.

Government has earmarked about $1 trillion for this buildout.
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PBOC has room to ease but doesn't need to be urgent; rate cuts possible closer to end of year or next year. PBOC Governor speaking at Lujiazui forum tomorrow may provide hints.

Central banks around the world are hiking rates, but China has important inflation coming back.

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