The latest reading of our China Activity Index continued to decelerate in May, now back down to 1% y/y compared to more than 2% y/y in Q1.

Domestic demand has already capitulated, however. Government expenditure is barely growing, household consumption has gone completely flat, broad corporate investment is contracting ... and the property and construction sectors are still a huge negative drag.

This leaves exports as the only driver ... but for how long? Export growth is accelerating, keeping freight and factory output in solid positive territory as well. As before, though, this is heavily due to US-bound AI investment trade, meaning that there is plenty of uncertainty about future prospects.