"Next week in China" fra Lundgreen's Capital

Major Data Releases:

• 10 February: China reports January M0, M1 and M2 or money supply rates
• 10 February: China reports January total social financing (TSF)
• 10 February: China reports January new yuan loans
• 11 February: China reports January Consumer Price Index (CPI)
• 11 February: China reports January Industrial Producer Price Index (PPI)
• 12 February: Hong Kong reports December volume and price statistics of external merchandise trade
• 13 February: Taiwan reports Q4, full-year 2025 gross domestic product
• 13 February: China reports January housing price index
  
  

The pace of major economic data releases is set to normalize entering the second week of February, offering a clearer read‑through on price dynamics and credit conditions across China’s markets.  

For inflation, January’s CPI is expected to rise by 0.6 per cent year‑on‑year and 0.4 per cent month‑on‑month, while PPI is projected to contract by 1.8 per cent year‑on‑year and 0.3 per cent month‑on‑month. Seasonal rebounds in pork and oil prices continue to underpin headline CPI, with core inflation showing signs of gradual improvement. However, for industrial producer prices, the inventory cycle remains a drag and capacity digestion for midstream manufacturing is likely to require more time. From a broader supply‑demand perspective, there remains limited evidence that PPI has reached a cyclical bottom. Still, select products with favourable payoff ratios may present opportunities for valuation repair.

Financial conditions point to a more measured start to the year. The typical January credit surge appears less pronounced this 2026, with new loans expected to reach RMB 5 trillion (USD 721 billion), down RMB 130 billion (USD 18.7 billion) compared to the same period last year, to log a 6.2 per cent loan growth. Total social financing is projected to increase by RMB 6.9 trillion (USD 994.5 billion), marking a year‑on‑year decline and easing TSF growth to 8.1 per cent. M2 growth is likely to stay unchanged at 8.5 per cent, while M1 growth may moderate to 2.2 per cent.

Structurally, corporate lending is showing early signs of improvement and government bond issuance remains strong. Among households, soft new home sales in major cities continue to constrain medium‑ to long‑term mortgage demand. Meanwhile, January’s manufacturing Purchasing Managers’ Index reading dipped to 49.3 per cent, suggesting a slowdown in industrial activity. Limited month-end declines in discount rates, however, may support a recovery in corporate credit. High‑frequency bond financing data also point to a year‑on‑year increase in net issuance of both corporate and government bonds, though elevated local government refinancing in January could weigh on net corporate credit. We expect a sustained slowdown after TSF growth peaked in July 2025, potentially settling at 7.5 per cent by yearend. Total credit expansion for 2026 is forecast at approximately RMB 35 trillion (USD 5 trillion).

Equity market performance slid over the past week. As of Thursday, 5 February, the MSCI China Index declined 3.03 per cent, the Shanghai Composite down 1.02 per cent, the Shenzhen Component lower by 1.78 per cent and the ChiNext Index retreating by 2.57 per cent. Large‑cap stocks continued to outperform their small‑ and mid‑cap peers with value equities holding a slight edge over growth stocks, mirroring recent market trends. Looking ahead, both policy and fundamental factors are expected to remain supportive though short‑term volatility cannot be ruled out. Ahead of the Lunar New Year, the market may experience a consolidation phase following its recent structural breakout. Nonetheless, maintaining positions through the holidays is advisable as post‑holiday trading typically benefits from strong high‑frequency data and renewed sectoral catalysts. As activity normalizes, conditions remain in place for markets to potentially resume their upward trajectory.

This piece has been co-produced with Yiyi Capital Limited in Hong Kong, a China specialist and a part of a global financial services group.

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