UBS Economics-China Economic Comment _Data Preview Mixed Domestic Growth,...

ab3 June 2025Global ResearchChina Economic CommentData Preview: Mixed Domestic Growth, Robust Exports High frequency: better NBS PMI, weak home sales, slightly softer port activitiesNBS manufacturing PMI edged up by 0.5ppt to 49.5 in May partly due to tariff de-escalation, with both new orders and production index improving, while Caixin manufacturing PMI slid further by 2.1ppt to 48.3. NBS non-manufacturing PMI edged down by 0.1ppt to 50.3 in May with slightly better service PMI but weaker construction PMI. 30-city property sales narrowed decline to -4% YoY in May, while top 100 developers' contract sales volume stayed weak at -20% YoY. Port cargo throughput and container throughput growth edged down to 4-6% YoY. Auto retail sales and wholesale growth held up at 16-17% YoY. On the other hand, steel production growth slid on a fading low base. See more in UBS China Activity Tracker.May data preview: mixed domestic growth, largely robust exports For the upcoming May official data release, we expect a mixed picture of domestic economic activities and largely robust export growth. In particular, we expect lukewarm property sales (-1% YoY), large decline of new starts and property investment (-10% YoY), robust infrastructure FAI growth, slower retail sales growth (4.4% YoY), robust export growth (8% YoY), and slightly faster industrial production growth (6.3% YoY). TSF credit growth likely stabilized at 8.7% YoY, with new RMB loans at RMB 800bn and new TSF at RMB 2.15 trillion. CPI likely stayed weak (-0.1% YoY) and PPI deflation likely deepened (-3.2% YoY). GDP growth to stay resilient in Q2 but decelerate notably in H2The US increased additional sectoral tariffs of steel and aluminum from 25% to 50% last week. It affects 9% of Chinese exports to the US and likely pushes up the weighted average additional US tariff rate on China to 32% YTD. We think front-loading of exports and related production during the 90-day pause, ongoing implementation of already announced stimulus and a low base are likely to underpin Q2 GDP growth of 4.5-5.0% YoY. Meanwhile, the payback for such front-loading and the initial shock of higher US tariffs may weigh on growth momentum in H2 (UBS estimate: 3.0-3.5% YoY), although the expected additional policy stimulus may help stabilise growth in late 2025. Key forecast risks to watch include the size and timing of additional policy stimulus, the path of US-China trade relations and the development of the property downturn. See more in China CFO survey and latest macro view. This report has been prepared by UBS Securities Asia Limited. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES, including information on the Quantitative Research Review published by UBS, begin on page 10. EconomicsChinaNing ZhangEconomist ning.zhang@ubs.com +852-2971 8135Grace WangEconomistS1460524050003 grace-zc.wang@ubs.com +86-105-832 8335Jennifer ZhongEconomistS1460516050002 jennifer-a.zhong@ubs.com +86-105-832 8324Tao WangEconomist wang.tao@ubs.com