China Economics: Signs of Stabilization Ahead of Politburo? – Jun/Q2 Data Preview

Research evidence excerpt

China Economics: Signs of Stabilization Ahead of Politburo? – Jun/Q2 Data Preview

Viewpoint |

01 Jul 2026 21:55:14 ET │ 8 pages

China Economics

Signs of Stabilization Ahead of Politburo? – Jun/Q2 Data Preview

CITI'S TAKE

Xiangrong Yu AC

June data is likely to show tentative stabilization, with exports leading +852-2501-2754

growth and retail sales potentially turning positive on accelerating trade-in xiangrong.yu@citi.com

subsidies. Likely soft investment and weak credit nonetheless reinforce the

case for easing – July's LPR decision is the earliest test point. Xinyu Ji AC

+852-2501-2792

Signs of stabilization ahead of Politburo? — We maintain our growth forecast at xinyu.ji@citi.com

4.5%YoY for 26Q2E, which could mark the trough for the year (see: China Outlook AC Yuanliu Hu26H2: AI Supercycle Cuts into the K-shaped Economy). Monthly indicators could

show signs of stabilization. Industrial production is likely to hold steady at 4.6%YoY +852-2501-2746

thanks to AI-centric exports and investment. Retail sales may turn positive at yuanliu.hu@citi.com

0.6%YoY on a more favorable base and – more importantly – accelerating trade-in

subsidies. Daily average subsidized sales quickened to ~RMB8.8bn in Jun 1-20

compared with ~RMB5.4bn in Jan-May (people.com, Jun 22nd and Jun 20th).

Investment remains a drag: we expect cumulative contraction in FAI to deepen to -

4.5%YoY Ytd, though the monthly pace of decline could narrow to a mid-single digit.

This set of data is unlikely to shift the tone of the mid-year Politburo meeting. We

continue to see only piecemeal consumer support, with July as the earliest window

for an LPR cut following the surprisingly low O/N reverse repo rate.

Will exports continue to lead growth? — We forecast China’s exports to stay strong