1、 This document contains important disclaimer and disclosure information.Please refer to the back inside cover of this research report.ECONOMICS 15 July 2025 Extract from a report On Our Minds China Solid 2Q growth,but deflation concern remains Chinas 2Q GDP remained solid,supported by export frontlo

2、ading and consumer stimulus.However,due to deflation,nominal GDP growth eased to its lowest level since 4Q22.Regarding the June data,industrial production soared on the back of exports and technological resilience.However,domestic demand indicators softened.Looking through the volatility,retail sale

3、s remained healthy,while FAI eased,and property worsened on the margin.On the price front,despite CPI returning to positive territory,PPI deflation deepened,reminding us of the risks from US tariffs and excess capacity.Despite a strong 1H,the outlook is set to sour in 2H as export frontloading fades

4、 and the impact of US tariffs becomes more visible.Renewed weakness in house prices and the fading impact of subsidies also cast doubt over the sustainability of the consumption recovery.More stimulus towards housing and domestic demand will still be needed to achieve this years GDP target,likely af

5、ter the summer.But for the upcoming July Politburo meeting,policymakers will likely be in a wait-and-see mode.Just today,the government held the Central Urban Work Conference.No major stimulus regarding the property sector was announced,but policymakers pledged to steadily promote urban village rede

6、velopment and city upgrades.We anticipate that the pace of these projects could pick up in 2H25 and 2026,especially if tariff shocks turn out to be worse than we anticipate.Longer-term,easing NGDP growth highlights that deflation is still a key problem for policymakers to tackle.The fight to curb ex