China: Economic momentum likely sustained in June - UOB Group

Both the CFLP manufacturing and non-manufacturing PMIs added 0.2 pt from May. The contraction in manufacturing activity eased as frontloading continued while non-manufacturing expanded at a slightly faster pace due to a rebound in construction, UOB Group's economist Ho Woei Chen reports.

Near-term outlook stabilizes as US and China inched closer to a trade pact

"However, the weak employment outlook in both the manufacturing and nonmanufacturing sectors indicates that the economy has remained fragile, increasing the risks when momentum reverses in 2H25 due to the high base and payback for the frontloading."

"Based on the industrial and services production data in Apr and May, we have estimated China's real GDP growth to be 5.2% y/y (1.0% q/q SA) in 2Q25 compared to 5.4% y/y (1.2% q/q SA) in 1Q25. Economic momentum is likely sustained in Jun amid the government's stimulus and manufacturing production frontloading."

"PBOC's 2Q25 Monetary Policy Committee meeting statement released on Fri (27 Jun) reaffirmed 'a moderately loose monetary policy' and to 'strengthen counter-cyclical adjustments' but removed references from 1Q25 to 'implement required reserve ratio (RRR) and interest rate cuts at an appropriate time' and instead called for 'flexibly grasping the intensity and rhythm of policy implementation'. As we have highlighted, the near-term economic stabilisation is dependent on reaching a trade deal with the US, which will take precedence over more policy stimulus. We keep our call for only an additional 10-bps interest rate cut and 50-bps cut to the RRR in 4Q25."