UBS Economics-China Economic Comment _Data Preview Robust Q2 Growth, More...-116294997

ab3 July 2025Global ResearchChina Economic CommentData Preview: Robust Q2 Growth, More Headwinds AheadHigh frequency: better PMIs, weaker home sales, cooler port activitiesNBS manufacturing PMI edged up by 0.2ppt to 49.7 and Caixin PMI jumped by 2.1ppt to 50.4 in June, with both new orders and production index improving. NBS non-manufacturing PMI edged up by 0.2ppt to 50.5 in June with slightly softer service PMI but stronger construction PMI. 30-city property sales declined further to -10% YoY in June, and top 100 developers' contract sales volume declined more to -35% YoY in June. Port cargo throughput and container throughput growth each moderated to 1% YoY and 4% YoY. Auto retail sales picked up, while wholesale growth held up, both on a low base. Steel production growth weakened further in the first 20 days. See more in UBS China Activity Tracker and Appendix High Frequency Data Monitor.Data preview: soft June momentum, robust Q2 GDP growthFor the upcoming June official data release, we expect weaker property sales (6-8% decline YoY), continued deep decline of new starts and property investment (10-12% decline YoY), slower infrastructure FAI growth on high base, slightly softer growth of retail sales (6% YoY), exports (4% YoY), and industrial production (5.4% YoY). TSF credit growth likely edged up to 8.8% YoY. CPI likely edged up marginally (0% YoY) and PPI stayed in deep deflation (-3.3% YoY). We expect Q2 GDP growth likely remained robust at 5.0-5.2% YoY, albeit with a slower sequential QoQ growth than Q1. GDP growth to decelerate in H2; upside risk to our baseline forecastChina's GDP growth likely stayed robust above 5% YoY in H1, thanks to front-loading of exports and related production, earlier government bond issuance and implementation of already planned stimulus than 2024 (including trade-in subsidies), and a low base in Q2. That said, the payback for such front-loading, the ultimate shock of higher US tariffs, continued property downturn (see China housing survey), and a high base for fiscal stimulus may weigh on GDP growth in H2, although the expected additional policy stimulus may help stabilise growth in late 2025. Nevertheless, we see notable upside risk to our current baseline GDP growth forecast of 4% for 2025, given China's resilient growth year-to-date. 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 8324William DengEconomist william-w.deng@ubs.com +852-2971 6765Tao WangEconomist wang.tao@ubs.com +852-2971 7525 China Economic Comment 3 July 2025ab 2Figure 1: China data preview - June & Q2 2025Jun-2024May-2025Jun-2025actualactualUBSeCPI (% y/y)0.2-0.10.