> **来源：[研报客](https://pc.yanbaoke.cn)** # China Economy Summary ## Core Content China's economy is currently experiencing a K-shaped recovery, where certain sectors are performing well while others are struggling. The growth is being supported by export-driven industries and AI-related production, but domestic demand remains weak, especially in retail, property, and consumption sectors. ## Main Points - **GDP Growth**: China's GDP growth is expected to slow from 5.0% in 1Q26 to 4.6% in 2Q26, with full-year growth moderating to 4.7%. - **K-shaped Divergence**: The economy is showing a segmented expansion, with some sectors outperforming while others lag, driven by external demand and strategic manufacturing. - **Domestic Demand Weakness**: Retail sales declined for the first time since late-2022, with a YoY drop of 0.6%, and real retail sales likely fell by 1.8% after adjusting for CPI. - **Property Market Downturn**: The property market continues to decline, with new home sales down 13.1% in value terms and construction activity remaining depressed. However, tier-1 cities show some resilience. - **Fixed Asset Investment (FAI)**: FAI contraction deepened in May, with a YoY drop of 10.7%, and infrastructure investment fell sharply to -10.8%, indicating fading fiscal support. - **Inflation Trends**: CPI remained flat at 1.2% YoY, with core CPI softening to 1.1%. PPI increased, but the gains were concentrated in upstream sectors, not downstream. - **Credit Growth**: Credit growth is weak, with TSF growth slowing to a record low and new RMB lending dropping. Household and corporate loans contracted, despite ample liquidity. ## Key Sectors and Performance ### **Export-Linked Sectors** - **Exports of Goods**: Remained strong, with a YoY growth of 10.1% in May, indicating continued support from external demand. - **Competitive Exporters**: Sectors like shipbuilding and aerospace are performing well, contributing to the positive aspects of the K-shaped recovery. ### **AI-Related Sectors** - **Integrated Circuit Output**: Rose by 22.9%, showing strong growth in AI hardware. - **AI Infrastructure**: Expected to outperform, benefiting from the anti-involution campaign. ### **Property Chain** - **New Home Sales**: Fell by 13.1% in value terms, with construction activity down 24.6% in May. - **Home Prices**: New and existing home prices declined by 0.20% and 0.26% MoM, respectively, but tier-1 cities showed resilience with existing home prices rising 0.35% MoM. - **Property Investment**: Continued to contract, with a YoY decline of -24.3%, highlighting the ongoing challenges in the sector. ### **Consumption Sectors** - **Retail Sales**: Declined into contraction, with a YoY drop of 0.6% in May, indicating weak consumer confidence and demand. - **Auto Sales**: Fell by 16.1%, reflecting the payback from trade-in subsidies and weaker household confidence. - **Home Appliances and Furniture**: Retail sales declined by 15.6% and 8.7% respectively, showing a continued drag on consumption. ### **Infrastructure Investment** - **Infrastructure Investment**: Fell to -10.8% YoY in May, suggesting reduced government support. - **Government Bond Financing**: Continued to disappoint, limiting the potential for further fiscal stimulus. ## Policy Outlook - **Policy Support**: Likely to remain structural and focused on the supply side, with room for easing in 2H26 if economic momentum weakens further. - **Equity Divergence**: Expected to persist, with AI infrastructure, competitive exporters, and industrial leaders outperforming, while property-chain, low-end consumption, and domestically oriented cyclical sectors lag. ## Charts and Data - **Figure 1**: Economic indicators show a K-shaped recovery, with export and AI sectors outperforming while domestic demand remains weak. - **Figure 2**: Property sales and construction activity continued to decline, with tier-1 cities showing some resilience. - **Figure 6**: Retail sales of staples showed a mixed trend, with some categories like food and medicine experiencing growth. - **Figure 10**: Consumer confidence and household saving rates have declined, indicating weak domestic demand. - **Figure 11**: Urban unemployment rate and housing rent growth show a stable trend, with slight declines in both. ## Conclusion China's economy is characterized by a K-shaped recovery, where certain sectors are supported by external demand and AI-related activities, while domestic demand and the property market continue to struggle. Policy support is likely to remain limited and structural, with potential for easing in the second half of 2026 if needed. The recovery is expected to be uneven, with specific sectors outperforming while others lag, highlighting the need for targeted policy interventions to address the underlying issues in the domestic market.