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China’s June monetary indicators suggest a strong rebound in credit activity, supporting Beijing’s targeted stimulus approach:

• M2 Money Supply (YoY): Accelerated to 8.3%, up from 7.9% in May and slightly above the 8.2% forecast. This reflects easing monetary conditions and increased liquidity in the system.
• New Loans: Jumped to ¥2.24 trillion, far exceeding both the ¥1.96 trillion expected and the previous ¥620 billion in May. This surge signals a strong pickup in corporate and household lending, likely driven by policy efforts to boost demand.
• Outstanding Loan Growth (YoY): Held steady at 7.1%, in line with previous readings, showing moderate and stable credit expansion over the year.
• Total Social Financing (TSF): Rose to ¥4.2 trillion, topping both the ¥3.65 trillion consensus and ¥2.29 trillion in May. This broad measure of credit includes shadow banking and points to a wider recovery in financial intermediation.

📊 Interpretation:

These figures suggest that China’s credit impulse is strengthening, with banks responding to policy cues and seasonal factors. The strong rebound in new loans and TSF reflects improving sentiment and greater willingness to lend, particularly to infrastructure, manufacturing, and possibly property sectors.

China’s trade data for June came in stronger than expected, pointing to continued momentum in both external demand and domestic activity:

• Exports (YoY): Rose by 5.8%, beating expectations of 5.0% and improving from 4.8% in May. This reflects robust global demand for Chinese goods, especially in electronics and machinery.
• Imports (YoY): Increased 1.1%, slightly below the 1.3% forecast but a solid rebound from the -3.4% drop in May. This suggests firmer domestic consumption and industrial restocking.
• Trade Surplus (USD): Widened to $114.77B, above both the expected $113.2B and last month’s $103.22B, reinforcing China’s strong net export position.
• Trade Surplus (CNY): Came in at ¥825.96B, well ahead of the ¥743.56B seen in May.

Despite ongoing geopolitical tensions and supply chain shifts, China’s trade sector remains resilient, with export growth outpacing imports. However, the slower recovery in import growth may still indicate cautious domestic demand.

The Thomson Reuters/Ipsos Primary Consumer Sentiment Index (PCSI) for China climbed to 71.33 in July, up from 69.52 in June. This marks a notable increase in consumer confidence, signaling growing optimism about personal finances, the economy, and job prospects.

The rebound could reflect stabilizing macroeconomic indicators and renewed policy support from Beijing aimed at boosting domestic demand.

Consumer Price Index (CPI) YoY:

• Inflation rose 0.1% year-over-year, rebounding slightly from -0.1% in May and beating the -0.1% forecast. This marks the first positive annual print in two months, but still highlights muted consumer price pressure in China’s sluggish post-COVID recovery.

Consumer Price Index (CPI) MoM:

• Prices fell 0.1% month-over-month, softer than the flat 0.0% expectation, but less negative than May’s -0.2% decline.

Overall, the CPI figures continue to show persistent disinflationary pressure in the world’s second-largest economy, reflecting weak domestic demand and cautious consumer spending.

The Caixin China Services PMI fell to 50.6 in June, below expectations of 51.0 and down from May’s 51.1, marking the slowest expansion in the services sector since October 2023 and hovering just above the 50.0 threshold that separates growth from contraction.

The softer reading reflects sluggish growth in new business and weakening domestic demand, with many service providers citing cautious consumer spending and intensifying competition. Employment growth in the sector also moderated, while input price pressures persisted, squeezing margins.

Analysts warn that the slowdown in services activity highlights fragile momentum in China’s broader economic recovery, increasing the likelihood of further targeted policy support as Beijing aims to stabilize growth in the second half of 2025.

The Caixin Manufacturing PMI for China soared to 50.4 in June, well above expectations of 49.2 and sharply higher than May’s 48.3 reading, marking the first expansionary reading in three months and signaling renewed momentum in private-sector manufacturing.

The improvement reflects a robust rebound in new orders and output, alongside easing input cost pressures, as both domestic and overseas demand showed signs of stabilization. The upbeat reading contrasts with recent weakness in some official data and points to strength among smaller, export-oriented manufacturers.

Analysts note that while the surge in the Caixin PMI suggests positive short-term momentum, sustaining recovery will depend on durable demand at home and abroad, as well as ongoing policy support to shore up confidence in China’s industrial sector.

• Composite PMI rose to 50.7 in June, up from 50.4 in May, reflecting a slight improvement in overall economic activity, but still consistent with sluggish momentum.
• Manufacturing PMI edged up to 49.7, just below expectations (49.6) but marking the third consecutive month below the 50.0 threshold, signaling continued contraction in factory activity.
• Non-Manufacturing PMI (covering services and construction) improved to 50.5, above forecasts of 50.3 and up from last month’s 50.3, indicating modest expansion in the services sector.

The data point to a mixed picture for China’s economy, with services stabilizing while manufacturing remains under pressure from weak domestic demand, global trade headwinds, and persistent deflationary pressures. Analysts expect Beijing to consider additional targeted stimulus to shore up growth in the second half of 2025.

• Year-to-date industrial profits through May fell 1.1% compared to the same period last year, reversing the 1.4% gain seen in April.

The renewed decline reflects persistent pressure on China’s industrial sector, stemming from weak domestic demand, soft global trade, and ongoing deflationary pressures in producer prices. Despite recent stimulus efforts, profit margins remain under strain in many heavy industries and private manufacturing.

This underperformance raises questions about the durability of China’s economic rebound and may prompt further targeted easing by policymakers to support industrial output and investment.

China’s central bank left the one-year Loan Prime Rate unchanged at 3.00% and the five-year rate at 3.50% in June (previous: 3.00% and 3.50%), maintaining its accommodative lending framework amid ongoing efforts to support economic recovery.

China’s retail sales surged 6.4% year-on-year in May (forecast: 4.9%; April: 5.1%), underscoring stronger-than-expected consumer demand. Through the first five months, retail sales climbed 4.06% year-on-year (April YTD: 3.73%), signaling sustained spending momentum. Meanwhile, the urban unemployment rate dipped to 5.0% in May (forecast: 5.1%; April: 5.1%), marking a modest improvement in the labor market.

China’s industrial production rose 5.8% year-on-year in May (forecast: 5.9%; April: 6.1%), marking a modest slowdown in factory output. Year-to-date industrial production grew 6.3% YoY through May (April YTD: 6.4%), underscoring continued, albeit cooling, momentum in the manufacturing sector.

China’s house prices fell 3.5% year-on-year in May (forecast: –4.0%; April: –4.0%), marking a reduced pace of annual decline. Fixed‐asset investment rose 3.7% YoY through May (forecast: 4.0%; April: 4.0%), underperforming expectations and signaling muted capital spending.