China Macro in 8 Terms

研报英文原文证据摘录

China Macro in 8 Terms

ocks

We view China's economy in 2026 as facing twin shocks: a positive shock from the AI-driven export boom and a negative one

from the Iran crisis (China Facing Twin Shocks - AI Outweighs Iran, For Now, 13 May 2026).

So far this year, the positive AI tailwind has prevailed with China's tech exports rising 31% yoy (Fig 2). However, if the Iran crisis

drags on, prolonged high oil prices could force central banks in advanced economies to tighten policy, dampening AI capex and

eventually hurting China’s exports.

For the rest of 2026, China’s economy will be shaped by these twin shocks. If the AI boom continues to dominate, 2-Speed

Growth will persist with exports as the main driver. The key risk is that the Iran crisis eventually overwhelms the AI tailwind,

causing a sudden collapse in China’s tech exports. In that scenario, Beijing would quickly pivot to stimulating domestic demand.

V. Conventional vs. Unconventional Housing Policy

We classify housing policy measures into two categories: conventional and unconventional (When will housing bottom?, 5

Dec 2025)

• Conventional measures involve lowering transaction and financing costs for homebuyers (e.g., cutting mortgage rates and

relaxing purchase restrictions).

• Unconventional measures involve large-scale government funding injection into the housing market, such as the

shantytown monetisation programme in 2015, or a large-scale housing inventory purchase programme funded by the

PBoC.

Conventional measures could provide a short-term boost to the market, but will be hard to reverse the broad down-cycle.

Expectation is the key constraint. With home prices back at 2016 levels, rents at 2015 levels, and tepid wage growth, potential

home buyers are expecting further declines in prices, rents and income.