00:00Well, Zhang Zhewei is President and Chief Economist at Pinpoint Asset Management.
00:05It's a bit surprising that the industrial profit improved quite a bit.
00:11But, you know, it's a rather volatile number, so I wouldn't read too much into the headline.
00:16But I think if you read into the details, it's quite interesting signs that there's a bit of a diverging trend across different sectors.
00:25So some sectors are doing very well, such as, you know, high-tech sectors, equipment-related, automobile-related sectors are doing very well.
00:37And then there are also some sectors such as commodity mining, these kind of upstream sectors that still suffer a bit from deflation.
00:44So it's quite interesting diverging trends.
00:47And what about private firms? To what extent have they driven this trajectory?
00:52I think a lot of these high-tech companies are indeed driven by private companies.
00:58And last year we also saw quite many private companies becoming very active in the, for instance, tech companies,
01:08as well as companies that in the AI-related sectors becoming quite active and performed very well in the stock market as well.
01:17Producer deflation seems to be easing.
01:23Is that something that you're watching closely?
01:27Yeah, I mean, this is more or less, I would say, in line with market expectation, actually.
01:33In the second half of last year, I think the market already expected the producer price deflation in 2026 will improve on the margin.
01:43It probably will not turn positive very soon.
01:48Maybe by the end of this year, I think the market expectation is that PPI, inflation number, will turn positive.
01:55But the general trend of, on the margin, you know, the deflation become less severe,
02:02and this gap between CPI and PPI narrowing, I think that is already showing up in data.
02:11And this industrial profit number is just another confirmation signal.
02:15So taking all of those numbers in, what does it tell us about the health of China's economy and prospects for growth?
02:22I think this is a data point that certainly on the positive side that helps people to strengthen this sort of outlook on PPI, inflation, gradually improving.
02:39I think that's a very important data point that people are watching, particularly for the manufacturing sector, for the industrial sector.
02:47And I think the data seems to be showing that this is indeed the development is very much on track in line with market expectation
02:59and particularly strong in some of the sectors such as high-tech and equipment manufacturing sectors.
