UBS Economics-China Economic Perspectives _China by the Numbers (June 2025...-116092552

ab22 June 2025Global ResearchChina Economic PerspectivesChina by the Numbers (June 2025) Our guide to Chinese monthly dataWhat the numbers are, what they mean and the outlook going forward.Mixed but robust growth in May; property downturn continues May's economic data showed stronger retail sales growth (6.4% YoY) than in April and market expectations. Sectors benefiting from trade-in subsidies reported much stronger sales growth, and those without subsidies recorded largely stable growth. Infrastructure investment remained resilient (9.3% YoY), while manufacturing FAI growth edged down (7.8% YoY). Export growth (4.8% YoY) and industrial production (5.8% YoY) moderated in May, although both remain largely robust. May's growth resilience likely reflects some front-loading of exports and related production, as well as continued policy support. Property activity continued to decline YoY, as seasonally adjusted property sales and new start volume declined further from April. Deflationary pressure continued with weak CPI and a deeper PPI decline. Credit growth remained stable in May on strong government bond issuance. See May data comment. Average additional US tariffs may stay at current level for longer China and the US agreed in principle a "framework for implementing the Geneva consensus" in June (see China Weekly). China could potentially normalise export controls on some rare-earth elements for non-military purposes, while the US could relax some recent restrictions on chips, EDA software, jet engines and student visas. However, we flag challenges for both sides to reach a comprehensive deal soon, given significant differences on some fundamental issues (see related discussions in China CFO survey). Even from a legal perspective, if reciprocal and fentanyl-related tariffs are removed, it is still possible the US may leverage alternative trade provisions to impose new tariffs. The weighted average US additional tariffs YTD on China may stay at the current level of around 32% for longer, in our view. More growth challenges in H2; additional policy support needed Growth in exports, IP, retail sales and investment activity were resilient in 5M25 on front-loading of exports and planned policy stimulus. However, we expect increasing growth headwinds in H2, as the payback of rushed export orders starts to kick in and fiscal subsidies are exhausted. In addition, China’s property downturn continues with declining prices and sales, and weaker purchase sentiment (see the China housing survey), while high frequency data pointed to a wider YoY decline in 30-city property sales into June. As such, we expect additional policy support in H2, including an additional 20-30bp policy rate cut and 0.5-1ppt of GDP in additional fiscal stimulus (see more). Reportedly, the latter may include a a new special financing tool of Rmb500bn for policy banks. Given YTD robust growth momentum, the additional policy stimulus may be data-dependent and possibly introduced around