Capital investment in frontier fields like artificial intelligence increased by approximately fivefold year-on-year in May.
The National Bureau of Statistics is set to release key economic data for May, including industrial output, consumption, and investment figures, on June 16. Market attention is focused on whether the Chinese economy can stabilize and rebound after experiencing short-term fluctuations in March and April.
On June 10, Zheng Shanjie, Chairman of the National Development and Reform Commission, chaired a symposium with economic experts. He stated that in the face of an increasingly complex and severe international environment, China has effectively responded to external uncertainties with the certainty of its own development, further demonstrating the economy's strong resilience and vitality. He emphasized the need to fully utilize macro policies and leverage the integrated effects of existing and incremental policy measures.
While outlining plans to deepen reforms, expand domestic demand, and fully implement the "AI Plus" initiative, Zheng Shanjie particularly stressed the importance of "firmly safeguarding the basic livelihood needs and making every effort to promote employment for key groups." He also proposed expediting the research and preparation of a batch of targeted and operable policy tools to be rolled out as needed.
The latest "CBN Chief Economist Confidence Index" released by the CBN Research Institute stands at 49.9, showing a slight decline from the previous month. Economists believe future policies should continue to work in synergy to further boost demand, maintain moderate economic growth, actively implement the employment-first strategy, and solidify the foundation for people's livelihoods.
Frontier Investment Up Approximately Fivefold
Regarding investment, economists participating in the CBN survey forecast an average growth rate of -2% for fixed-asset investment in May, unchanged from the figure published for the previous month. The negative growth is primarily attributed to the drag from real estate investment, while new growth drivers like investment in high-tech industries are expected to maintain relatively rapid growth.
Wen Bin, Chief Economist at China Minsheng Bank, estimates that investment from January to May will have declined by 1.9% year-on-year. Breaking it down by the three major sectors: some leading indicators have softened, and new special bond funds for project investment have decreased both year-on-year and month-on-month. However, with recent meetings in various regions to plan or connect projects using new policy-based financial instruments, coupled with the continued release of demand related to urban renewal and the "six networks" construction, overall infrastructure investment growth may see a slight deceleration. Supported by equipment upgrades and expansion in high-end manufacturing, manufacturing investment retains some resilience, though the momentum for broad-based recovery remains weak. While May saw marginal improvements in property sales and land markets, construction activity remains subdued, with downward pressure on real estate development investment not yet significantly alleviated, potentially leading to a widening cumulative decline.
Cai Wei, Director of the KPMG China Economic Research Institute, noted that the construction PMI for May rose by 0.8 percentage points to 48.8%, indicating the gradual emergence of peak season effects for infrastructure construction and an accelerated pace of project implementation, which has somewhat eased the industry's downturn. However, the sector overall remains in contraction territory, and the recovery process for fixed-asset investment is still volatile, not yet entering a stable expansion phase.
Data from the State Information Center shows that in May, capital investment in frontier fields such as artificial intelligence and humanoid robots surged by about five times year-on-year. The winning bid amounts for infrastructure projects in areas like computing power, data, and networks grew by 106.9% year-on-year.
Xing Yuguan, Associate Research Fellow at the Big Data Development Department of the State Information Center, stated that guided by a series of national strategic deployments, capital is accelerating its flow into frontier sectors like AI and humanoid robots, while digital infrastructure such as computing power is being rapidly deployed. This has created a positive pattern of investment synergy, accumulating momentum for industrial upgrading and quality improvement. The deep integration of technological and industrial innovation is accelerating the transformation of innovative achievements into industrial applications, driving development forward steadily and powerfully.
Cheng Shi, Chief Economist at ICBC International, participating in the CBN survey, remarked that the growth momentum for China's economy in the second half of the year is converging towards higher quality. A new growth logic centered on technological innovation and total factor productivity improvement is already evident in the data, with high-tech industrial investment maintaining rapid growth and capital gathering in new fields. Macro policies maintain a proactive stance and retain room for further action.
Industrial Growth May See Slight Rebound
Economists participating in the CBN survey forecast an average year-on-year growth rate of 4.3% for industrial value-added in May, slightly higher than the 4.1% published figure for April.
Looking at leading indicators, the Manufacturing Purchasing Managers' Index (PMI) for May was 50.0%, down 0.3 percentage points from the previous month. Zhang Liqun, a special analyst at the China Federation of Logistics & Purchasing, believes the continued slight decline in the manufacturing PMI indicates that economic growth momentum still needs strengthening. The decline in order-related indices highlights the persistent issue of insufficient demand. Affected by this, production indices, procurement quantity indices, and business expectation indices have all softened. The pattern of strong supply versus weak demand continues to be a prominent constraint on economic recovery.
Lu Zhengwei, Chief Economist at Industrial Bank, stated that due to base effects, the year-on-year growth rate of industrial value-added in May is expected to pick up. In the computer and electronics sector, the continued rise in the DX Index (memory chip price index) reflects robust demand from AI investments, suggesting that industrial value-added in computers, communications, and electronics may maintain relatively fast growth. Considering the relatively low base from May last year, the year-on-year reading for industrial value-added in May may show a slight rebound.
However, some institutions hold a more cautious view. A macro research report from China International Capital Corporation (CICC) noted that the negative impact of energy supply constraints persists, with operating rates in some chemical industries remaining weak. Operating rates in other mid- and upstream industries are constrained by domestic demand, while export-related sectors continue to be supported by resilient external demand. Overall, it is estimated that the year-on-year growth rate of industrial value-added in May will slightly decline to 4.0%.
Offline Consumption Vitality Unleashed
Regarding consumption, economists participating in the CBN survey forecast an average year-on-year growth rate of -0.1% for total retail sales of consumer goods in May, slightly lower than the 0.2% published figure for April. Auto consumption is the main drag, with major durable goods consumption likely to continue declining due to the pull-forward effect of trade-in policies.
Automobiles constitute a significant portion of consumption, accounting for about one-tenth of total retail sales. The latest data from the China Association of Automobile Manufacturers shows that in May, China's automobile production and sales reached 2.616 million and 2.629 million units respectively, down 1.2% and 2.1% year-on-year. Influenced by multiple factors including policy adjustments, changes in market structure, and a challenging macro environment, domestic auto market sales have continued to decline.
Benefiting from the recovery of consumption scenarios during the May Day holiday and the concentrated release of offline consumption vitality, the momentum for consumption recovery continues to strengthen. Offline consumption big data released by the State Information Center shows that in May, offline consumption payment amounts increased by 2.4% year-on-year. Specifically, goods consumption and service consumption grew by 3.3% and 1.2% year-on-year respectively, up 0.6 and 0.8 percentage points from April. By category, consumption in electronics, catering services, and transportation services grew relatively quickly at 9.7%, 5.4%, and 4.8% respectively.
The "Shou Qian Ba" physical business vitality index, reflecting the vitality of small and medium-sized merchants, stood at 80.7, up 1.9% from April, marking the third consecutive month of improvement. Within this, the merchant health index and consumer vitality index increased by 2.1% and 1.6% respectively compared to April.
Utilizing Macro Policies Fully
In the first quarter of this year, China's economy achieved a growth rate of 5%, exceeding market expectations. However, since the second quarter, some economic indicators have shown signs of softening.
Guan Tao, Global Chief Economist at BOC Securities, analyzed that the strong performance of macro data at the beginning of the year was due to, on one hand, a relatively stable external environment providing favorable conditions for China's steady growth, and on the other hand, factors such as the timing of the Spring Festival in 2026, efforts by economic entities at all levels to achieve a "good start," front-loaded fiscal expenditure, enterprises seeking financing and building inventory early in the year, and an extended pre-holiday consumption period for residents, which collectively led to a temporary synchronized uptick in domestic demand.
"After entering the second quarter, these factors have diminished to varying degrees, particularly as geopolitical conflicts in the Middle East have directly impacted the global energy, chemical, and shipping industries, posing potential risks to global food security, energy security, price stability, and economic prospects," Guan Tao said.
At the economic situation symposium, Zheng Shanjie held discussions with experts including Cai Fang, Member of the Chinese Academy of Social Sciences, Zhang Li, President of the CCID Research Institute, and chief economists from several domestic and international securities firms like BOC Securities. They exchanged views and suggestions on analyzing the current economic situation, continuously expanding domestic demand, promoting high-level technological self-reliance and controllable industrial chains, and stabilizing employment, enterprises, markets, and expectations.
Zheng Shanjie noted that with the implementation of the "15th Five-Year Plan" outline and the effective implementation of macro policies, China's economy has had a good start to the year, maintaining a stable and progressive, innovation-driven development trend. Facing a more complex and severe international environment, China has effectively responded to external uncertainties with the certainty of its own development, further demonstrating the economy's strong resilience and vitality.
He proposed fully utilizing macro policies and leveraging the integrated effects of existing and incremental measures; strengthening the planning and construction of networks for water, new-type power grids, computing power, next-generation communications, urban underground pipelines, and logistics, promoting the combination of investment in physical assets and human capital, and effectively implementing consumer goods trade-in policies; accelerating the construction of a modern industrial system and fully implementing the "AI Plus" action; continuously deepening reforms and innovation, advancing the development of a unified national market, and intensifying efforts to curb "involution-style" competition.
Artificial intelligence holds significant potential to drive economic growth and improve livelihoods, but in the short term, it may also have a certain impact on employment. Zheng Shanjie emphasized the need to firmly safeguard basic livelihood needs and make every effort to promote employment for key groups. Simultaneously, he stressed the urgency to research and prepare a batch of targeted and operable policy tools for timely implementation as needed, to continuously consolidate the foundation for sustained and stable economic improvement.
Cai Fang has previously stated publicly that artificial intelligence exacerbates structural employment contradictions. As the intensity of the impact increases, the strength of policy response must also increase accordingly. The next five years will be a critical period where China's economic structural transformation deeply intertwines with demographic trends. Employment policies should be laid out proactively to steer AI towards becoming an "empowering tool" rather than a "substitution threat," achieving "human-machine complementarity" instead of "human-machine competition."
Luo Zhiheng, Chief Economist at Yuekai Securities, suggested promptly updating the employment monitoring system, with a focus on tracking changes in high-risk positions and youth employment. He also recommended optimizing social security and unemployment protection to effectively address issues of structural unemployment and downward mobility among workers. Furthermore, he advocated for advancing income distribution reforms, improving long-term wage growth mechanisms, strengthening the redistributive function of direct taxes, and preventing the excessive concentration of productivity gains towards capital.
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