Barclays_China_H2_Outlook_Moderating_activity_resilient_consumption

1 "China’s consumer goods trade-in program on track, central subsidies to be issued in batches through Q4", Global times,20 June 2025Please see analyst certifications and important disclosures beginning on page 10.China H2 OutlookModerating activity, resilientconsumptionWe expect momentum to slow given worsening propertyindicators, payback in exports after the front-loading andexpected slowdown in US consumption in H2, and resilientbut moderating consumption. New fiscal stimulus is likely toemerge around or after Sep-Oct high level meetings.Following the strong Q1 GDP growth print of 5.4% y/y, April and May activity data painted abroadly mixed picture of domestic demand, with a deeper contraction in property investment,slower but still robust equipment upgrading investment, and continued recovery inconsumption. The external sector is faring better. Despite significant declines in shipments tothe US, headline exports remained strong in April-May due to continued trans-shipments viathird-party countries and exporters finding alternative buyers across the rest of the world, whichalso lent some support to industrial production. Looking ahead, our base case is for growth momentum to moderate to ~3% q/q saar in H2, fromaround 5% in Q1. This reflects worsening property leading indicators such as home prices andland sales amid deteriorating sentiment, some payback in exports after strong front-loadingeffects in H1, and the expected slowdown in US consumer spending in H2, plus moderating butstill resilient consumption with the remaining CNY138bn trade-in subsidy (out of a full-yearquota of CNY300bn) being distributed in July and October, according to the NDRC and MOF on19 June1 . We maintain our below-consensus China GDP growth forecast of 4.0% for 2025, afterexamining the three key drivers of growth in H2 against the likely macro policy and tariffoutlook, though we see some upside risks to Q2 growth and hence our full-year growth forecastgiven China's production-based GDP compilation. Key dates/events to watch to gauge any potential stimulus package and the trajectory of theChina-US trade relationship include: 1) 12 August, when the 90-day tariff pause ends; 2) the NPCstanding committee meeting (likely in September or October), where a new fiscal stimulus couldbe announced; 3) 20 October, when Q3 GDP data are due; 4) the late-October Politburomeeting, where President Xi will set the tone for policy direction; and 5) the APEC Summit inKorea (31 Oct- 1 Nov), which President Xi and President Trump are expected to attend.The property sector is still searching for a bottomThe deteriorating key property indicators in April and May are consistent with our observationsmade during field trips to China in April and May (Figure 1). In particular, after some stabilisationin March, secondary market home prices continued to decline even in top tier cities, and morethan 95% (67 cities) of the 70 cities that we track posted m/m price declines, the highest sinceafter the