Tracking industrial risks: Demand growth continued to notably outpace supply in June - good for risk reduction

Research evidence excerpt

Tracking industrial risks: Demand growth continued to notably outpace supply in June - good for risk reduction

Update

July 30, 2026 01:09 PM GMT

Morgan Stanley Asia Limited+MChina Financials | Asia Pacific Richard Xu, CFA

Equity Analyst

Tracking industrial risks: Richard.Xu@morganstanley.comChenqian Liu +852 2848-6729

Research Associate

Chenqian.Liu@morganstanley.com +852 3963-0359

Demand growth continued to Chiyao Huang

Chiyao.Huang@morganstanley.com +852 3963-4624

notably outpace supply in June - Beryl Yang

Beryl.Yang@morganstanley.com +852 3963-2224

good for risk reduction

Key Takeaways

Nominal Industrial production increased 7.2% yoy (a proxy of industrial demand)

while manufacturing FAI (a proxy of growth in supply) fell 1.2% yoy in June. China Financials

Asia Pacific

June marked the 9th month of overcapacity reduction in China, which partly Industry View Attractive

supported the strong manufacturing profits growth of 20.1% yoy and improved

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margin.

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Policy makers pushed more anti-involution initiatives amid strong export growth, cost of supporting ongoing industrial upgrades

a great opportunity to further de-risk the financial system. (21 May 2024)

PPI declined 0.3% MoM, yet YoY growth expanded to 4.1% from a low base. China Financials: Earlier-than-expected NIM

rebound and decline in overcapacity risk (25

Industrial mid-to-long term loan growth remained rational at 5.9% yoy in 2Q26,

May 2026)

moderated from 6.8% yoy in 1Q26, which should help industrial credit de-risking.

China Financials: Tracking industrial risks:

Industrial credit de-risking trend intactOverall manufacturing profit growth remained strong with divergence across

supported by healthy total demand and rationalsectors.