1、7T2se3r0Ot6kwoPa7T2se3r0Ot6kwoPaDistributed on:23/07/2025 01:01:15 GMTDistributed on:23/07/2025 01:01:15 GMT23 July 2025Deutsche BankResearch Asia China Economics China Macro Date H2 2025 Outlook:Changing Policy PrioritiesnEconomy passed a stress test in H1.Chinas GDP growth stayed comfortably above

2、 5%in the first two quarters.Exports stayed resilient despite trade tensions and higher tariffs,while domestic demand picked up thanks to improved consumer sentiment and government subsidies.Importantly,private sector sentiment has steadily improved,thanks to technological breakthroughs in AI and ot

3、her sectors,government policy initiatives,and de-escalation of trade tensions with the US.nPolicy focus shifts to boosting inflation.In contrast with robust growth and resilient exports,the lack of inflation improvement in prices has become a key obstacle to Chinas economic recovery.PPI has been neg

4、ative for almost 3 years,reducing industrial profit margins to a 15-year low.Restoring price inflation will likely require supply-side measures similar to those in 2015-16.nSupply-side reforms,or anti-involution,will likely become a main theme of Chinas economy policy in H2.A high-level meeting on J

5、uly 1 put curbing low-price competition and exit of obsolete capacity as a top priority.We believe the central government has an important role to play in coordinating market exit and restoring healthy competition in a number of industries.nProperty sector continues to muddle through in 2025.New hom

6、e sales have dropped since Q2,in part owing to supply mismatches,while secondary transactions remained active.We expect property prices will likely drop further over the next 6-12 months,while a rebound in housing new starts and improved affordability could support sales in the next few quarters.nSl