The Global Point

Research evidence excerpt

The Global Point

Point |

Wednesday, 17 June 2026

Asia | CEEMEA | Western Europe | Key Rating and Target Price Changes

Asia

China Economics - AI Supercycle vs. Domestic Stagflation

China's K-shaped economy appears to be playing out through the contrast

between an AI supercycle and domestic stagflation. AI is driving industrial

production and exports, with high-tech IP reaching a five-year high. But domestic

demand is faltering, as retail sales contracted for the first time since Covid and FAI

decline deepened. Steady CPI and broader PPI suggest stagflation risks are on the

rise for the domestic economy. We maintain our headline GDP forecast at 4.5%YoY

for 26Q2E and 4.7%YoY for 2026E. On policies, we see an acceleration of targeted

support for domestic demand but not broad-based stimulus ahead. Investment-

stabilization measures such as the “Six Networks” initiative are underway.

Consumption and household income growth could be a key focus of July’s

Politburo meeting. But an outright lift of budget deficit or government bond quota

is not our base case, and monetary policy does not appear to be in the driver’s seat.

Xiangrong Yu | Xinyu Ji

China’s K-shaped economy now showing Stagflation risks on the domestic side rise with

through an AI supercycle vs. domestic contractionary retail sales and investment in

stagflation May

%YoY Monthly Activities Indicators %YoY Retail Sales, FAI and Inflation

40 10

-5

-10

-15

-20

Jan-24 Jul-24 Jan-25 Jul-25 Jan-26

Jan-20 Jan-21 Jan-22 Jan-23 Jan-24 Jan-25 Jan-26

Industrial production Retail sales FAI Exports Retail Sales CPI FAI, monthly est PPI

Japan Real Estate and REITs - Investment strategy in light of BoJ meeting

On June 16, the BoJ decided to hike its policy rate by 25bps and to cease its

reduction of JGB purchases from April 2027.