Will Beijing pivot like 2024?

研报英文原文证据摘录

Will Beijing pivot like 2024?

demand destruction in 1H26, as about 60% of the slowdown in industrial production from 1Q to

2Q26 was concentrated in the oil supply chain. With the US and Iran reportedly moving toward a final deal, Beijing may prefer

to wait for greater clarity on the external environment.

On Sep 14, 2024, ten days before the pivot, we wrote that "our working assumption remains that policymakers will anchor

their policy reactions with the 5% real GDP growth target...further policy support may be announced soon, such as cuts

in policy rate/existing mortgage rate/RRR; faster fiscal spending and more property loosening in big cities...These policies

may lead to a modest growth acceleration in 4Q24, bringing the annual GDP growth back to around 5%. But they are not

the bazooka needed to end deflation and stabilize housing" (link).

A similar logic applies today. The only difference is that, with six months still remaining in 2026, policymakers may not yet feel

the same urgency as in late 2024.

When will consumption strengthen?

From an investor’s perspective, the main concern in the May data is consumption. In year-on-year terms, retail sales fell for

the first time since 4Q22 (Sharp slowdown similar to 2024, 16 Jun 2026).

This consumption weakness is consistent with our view that China consumption and the AI boom are negatively correlated

(China consumption is the anti-AI trade, 11 Feb 2026). Given the “Just Enough” rule, an AI-led export boom has reduced the

urgency to boost domestic consumption.

Looking ahead, consumption in 2H26 will depend heavily on the AI capex cycle:

• If the AI capex boom remains strong, Beijing will likely continue to ride the export wave and consumption will stay soft.