The economy operated overall steadily in May, with structural differentiation still existing. Exports continued to maintain good growth, the growth rate of consumption increased, and the growth rates of industry and investment slowed down slightly. The economic structure's highlights were prominent, with continuous empowerment of high-quality development by scientific and technological innovation, and the continuous cultivation and strengthening of new quality productive forces.

Data released by the National Bureau of Statistics shows that in May, the national industrial added value above designated size grew by 5.6% year-on-year, a decrease of 1.1 percentage points from the previous month; from January to May, the national fixed asset investment (excluding farmers) grew by 4.0% year-on-year, a decrease of 0.2 percentage points from January to April; in May, the total retail sales of social consumer goods grew by 3.7% year-on-year, an increase of 1.4 percentage points from the previous month. The national urban surveyed unemployment rate in May was 5.0%, the same as the previous month.

Data released by the General Administration of Customs shows that in May, exports (valued in US dollars) grew by 7.6% year-on-year, an increase of 6.1 percentage points from the previous month. From January to May, exports (valued in US dollars) grew by 2.7% year-on-year, an increase of 1.2 percentage points from January to April.

The economy operated overall steadily in May, with external demand continuing to maintain a good recovery trend, and internal demand's marginal momentum still has certain differentiation. Compared with April, the year-on-year growth rate of consumption also increased, and the year-on-year growth rates of industry and investment decreased slightly. The highlights of the economic structure were prominent, with continuous empowerment of high-quality development by scientific and technological innovation, and the transformation trend of manufacturing towards high-end, intelligent, and green was obvious, with new quality productive forces continuing to be cultivated and strengthened.

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The economy operated steadily, with consumption momentum picking up. In May, the total retail sales of social consumer goods grew by 3.7% year-on-year, an increase of 1.4 percentage points from April. Among them, the month-on-month growth was 0.51%, the fastest single-month growth rate since 2024. The momentum of goods consumption improved. In May, the year-on-year growth rate of goods retail sales increased by 1.6 percentage points from April to 3.6%.

China Merchants Bank Research Institute believes that the data reflects two clues of goods consumption repair: one is that the demand for renewal and upgrading of consumer goods such as furniture and home appliances may gradually "decouple" from new housing sales; the other is that consumption promotion policies may boost the sales of related goods. Looking forward, in the second half of the year, as the base period slightly weakens, the year-on-year growth rate of consumption may improve, and the prosperity of service consumption may be relatively higher.

Investment momentum continued to show differentiation. From January to May, fixed asset investment grew by 4% year-on-year. Although the growth rate decreased by 0.2 percentage points from January to April, the investment structure continued to optimize. Driven by the high-end, intelligent, and green transformation of manufacturing, manufacturing investment maintained a relatively fast growth trend. From January to May, manufacturing investment grew by 9.6% year-on-year, 5.6 percentage points faster than the overall investment growth rate, contributing 57.3% to the overall investment growth.

High-tech industry investment continued to increase. From January to May, high-tech industry investment grew by 11.5% year-on-year, among which investment in the electronics and communication equipment manufacturing industry grew by 10.4%, investment in the aerospace and equipment manufacturing industry grew by 53.1%, investment in the information service industry grew by 19.1%, and investment in the science and technology achievement transformation service industry grew by 16.5%.

At present, the real estate market is still in the adjustment process. From January to May, real estate development investment decreased by 10.1% year-on-year, the area of new housing started decreased by 24.2%, the sales area of new commercial housing decreased by 20.3%, and sales decreased by 27.9%. Since mid-May, relevant departments and regions have further adjusted and optimized real estate policies. The effect of the policies still needs some time to be released, and we need to be patient about this.From January to May, infrastructure investment (excluding electricity, heat, gas, and water production and supply industries) grew by 5.7% year-on-year, a decrease of 0.3 percentage points compared to the January-April period. Haitong Securities analysis points out that due to factors such as the weak issuance of new special bonds by local governments in the first half of the year and the relatively low growth rate of government public fiscal expenditure, the funds in place for infrastructure construction were relatively less than in previous years, which has a certain drag on the current implementation and commencement of infrastructure projects. Looking at the operation rate of petroleum asphalt, it was at a relatively low level in recent years in May, reflecting the slow progress of infrastructure construction. However, with the issuance of ultra-long-term special treasury bonds in May and the acceleration of the pace of local special bonds, it is expected that subsequent infrastructure investment may see some improvement.

Exports remain a relatively certain direction in current economic growth and have driven industrial production to maintain a good growth trend. In May, the export delivery value of large-scale industrial enterprises grew by 4.6% year-on-year. Among them, the export competitiveness of some high-tech industries continues to strengthen. From January to May, the export of industrial products in the railway, ship, aerospace, automotive, and metal products industries all maintained rapid growth, with the export delivery value growing by 23.4%, 19.1%, and 16.4% year-on-year, respectively.

Faced with some fluctuations in short-term economic data and differentiation in economic structure, we need to combine the current stage of China's economy to have a more objective understanding.

The Chinese economy is still in the process of post-pandemic recovery. Due to the different impacts of the pandemic on various economic sectors, there are also differences in the pace of recovery among these sectors. We should pay more attention to medium and long-term trends rather than short-term minor fluctuations.

This new feature of economic recovery undoubtedly greatly increases the market's difficulty in predicting the economy. For example, at the beginning of the year, the market's expectation for economic momentum was pessimistic, but the actual situation was a growth beyond expectations; at the beginning of the second quarter, the market's expectation was generally optimistic, but the economic performance in April and May seemed not as strong as the market expected. The market's predictions based on past economic cycle patterns are prone to errors. For example, the market used to infer the momentum of economic growth based on the marginal changes of credit and social financing, and its effectiveness has been greatly weakened in the past two years.

Since the price performance of various industries during the recovery is not synchronized, and the market's economic expectations mainly rely on high-frequency nominal data of key industries, this is also prone to prediction errors.

New quality productive forces continue to grow

The Chinese economy is in the stage of continuously advancing towards high-quality development, with the transformation of old and new momentum. There will be certain pressures in the transformation and upgrading of old momentum, but more importantly, new momentum is growing vigorously.

According to the data from the National Bureau of Statistics, in May, the added value of high-tech manufacturing industry above designated size grew by 10.0% year-on-year, 4.4 percentage points faster than the total industrial industry above designated size. Among them, the electronics and communication equipment manufacturing industry grew by 13.7%, and has maintained double-digit growth since 2024; the output of high-tech products such as integrated circuits, 3D printing equipment, and full container ships grew rapidly. The digital economy is booming, and related fields such as intelligent manufacturing and online consumption are showing good momentum. In May, the added value of the intelligent unmanned aerial vehicle manufacturing industry grew by 75.0% year-on-year, and the added value of the intelligent vehicle-mounted equipment manufacturing industry grew by 19.7%. The green and low-carbon transformation is progressing steadily, and the clean and low-carbon supply of energy continues to strengthen. From January to May, the investment in clean electricity grew by 32.9% year-on-year.

The effects of the new round of large-scale equipment renewal and consumer goods replacement policies are gradually emerging. In terms of production, in May, the large-scale equipment renewal policy drove the added value of radio, television, and communication equipment manufacturing industries to grow by 30.7% and 15.7% year-on-year, respectively. In terms of products, the output of special equipment for agricultural product processing grew by 53.6% year-on-year, the output of numerical control forging equipment grew by 17.2% year-on-year, and the output of special equipment for the electronic industry grew by 11% year-on-year. In terms of investment, the investment in equipment and tools continues to maintain rapid growth. From January to May, the investment in equipment and tools grew by 17.5% year-on-year, an increase of 0.3 percentage points compared to the January-April period, driving the total investment to grow by 2.1 percentage points, and the proportion of total investment increased by 1.6 percentage points compared to the same period in 2023.As consumer product trade-in policies are gradually implemented in various regions, coupled with the "618" online shopping promotion, sales of home appliances, communication equipment, and new energy vehicles increased in May. In May, the retail sales of communication equipment and home appliances and audio-visual equipment above the designated quota grew by 16.6% and 12.9% year-on-year, respectively, with growth rates accelerating by 3.3 and 8.4 percentage points compared to April. New energy vehicle sales achieved rapid growth, with data from the China Automobile Circulation Association showing that the transaction volume of new energy passenger cars in May increased by 38.4% year-on-year.