Goldman Sachs China: Three Things in China
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Key Views
June CPI eased to 1.0% year-on-year from May's 1.2%, driven by declining energy and gold prices. PPI rose to 4.1% year-on-year from 3.9%, but month-on-month momentum deteriorated sharply. Goldman believes PPI inflation has likely peaked and has lowered second-half PPI forecasts following reduced oil-price assumptions, projecting full-year PPI of 2% for 2026 and 0% for 2027.
The PBOC's Q2 Monetary Policy Committee acknowledged the "strong supply, weak demand" dynamic but signaled no broad easing. Goldman expects no rate or reserve-ratio cuts in 2026. Governor Pan Gongsheng, speaking in Hong Kong, announced measures to improve offshore-RMB infrastructure, liquidity, and product offerings. Goldman anticipates continued RMB appreciation against both the USD and the currency basket.
On July 9, the Ministry of Commerce released guidance on accelerating retail innovation, emphasizing supply-side measures: securing access to supermarkets, convenience stores, and wet markets, upgrading product and service quality, and developing new retail formats. The document also tightens platform-economy antitrust scrutiny and addresses online-offline price disparities.
Outlook
Goldman projects no policy-rate or RRR cuts in 2026, PPI of 2% (2026) and 0% (2027), and continued RMB appreciation.
Recommended Securities
None explicitly recommended.