家，甜蜜的家：城市更新和基于永久居留的公共服务应有助于扩大消费和投资

China services should help expand consumption and investment Senior Economist, Greater ChinaThe Hongkong and Shanghai Banking Corporation Limitederin.y.xin@hsbc.com.hk+85229966975Jing Liu while reinforcing national security guardrails Chief Economist, Greater ChinaThe Hongkong and Shanghai Banking Corporation Limitedjing.econ.liu@hsbc.com.hk+85239410063Heidi Li in upstream petrol-chemical and Al-related industries AssociateGuangzhou China is emphasising structural reforms to boost consumption and investment.permanent residenceas opposedtohouseholdregistration (we wrotemoreextensivelyonthisinChina'sUrbanisation2.0,29May2026),theStateCouncilalsoprovided its 5-year road map forurban renewal on 28 May.These two policies gohand in hand and will be conducive to lifting both consumption and investment in themedium and longer-term Considering that the property sector's recent revival is concentrated primarily in theinfrastructure and high-quality housing development across a multitude of regionsand city clusters should be helpful in stabilising the overall property sector as well In the plan, the NDRC estimates that urban renewal during the 15th FYP (Five YearPlan)periodcouldmobiliseatleastRMB15trnofinvestment.includingaroundRMB5trnfrom underground pipeline network upgrades alone (NDRC, 7 April). Beyond investment,urban renewal is expected to reinforce broader policy priorities such as boostinginfrastructure,revitalising idlehousing stock and underutilised land,and prioritising theclosing of public service gaps, particularly in elderly care and childcare. On funding, the plan highlights a multi-channel approach, including central budgetinvestment, localgovernmentspecialbonds (eligibleprojectsmayuseproceeds asequity capital),new policy financial instruments and market-based financing,whileexplicitly prohibiting the creation of new implicit local government debt. Local government special bonds for urban renewal are expected to increase duringthe 15thFYP period.In Q12026, issuance of urban renewal-related special-purposebonds reached RMB120bn,up7% y-o-y (Xinhua, 16 April).Recent policies have alsoreiterated supportfor affordable housing; however even though special bonds havebeenpermittedforlandreservesandforpurchasingcommercialhousingusedforaffordable housing, progress has been limited so far. Ultimately, the scale-up ofsocial housing supply will hinge on stronger direct central funding and coordination. HSBCFundingtheFuture SurveySentiment, Al and Private CreditClick to view Issuer of report: The Hongkong and ShanghaiBankingCorporationLimited Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications inthe Disclosure appendix, and with the Disclaimer, which forms part of it. ViewHSBCGlobal InvestmentResearchat:https://www.research.hsbc.com Implementation of the deals from the May China-US presidential summit is now underway. The USplanstolaunchapublicconsultationcoveringatleastUsD3obnofnon-strategicChinesegoods to identify items that could qualify for tariff reductions or removals (Reuters, 26 May). Wewhich are likely to be in labour-intensive consumer goods. While the timing remains uncertain,the implementation of tariff reductions could be as soon as afew months,assuming a relatively also create room for a rebound in China-Us investment cooperation in non-critical strategicareas,although the pace could remain constrained by Us investment screening and corporatecompliance costs. Outbound Investment rules, effective from1 July,provide clarification on what constitutesprovide clarity around encouraged and prohibited actions which may impact national securityNon-sensitive channels are likely to still receive the greenlight to promote further ODl expansionas part of the China going global theme and BRI theme. The regulation strengthens the outbound investment security review regime and tightenscontrols over the export of technology,data and services, particularly relevant for sensitivesectors such as Al. It also codifies a formal toolkit for responding to discriminatory measures,including investmentbarrierinvestigations,countermeasures,andrestrictionson transactionsand entry, aligning with the countermeasure framework embedded in the April supply-chainsecurity rules (see China macro tracker, 9 April 2026).A more institutionalised set oftensions with the EU. Industrialprofits concentrated in upstreampetrol-chemicaland Al-related industriesIndustrial profits rose 25% y-o-y in April, accelerating from Q1's 15.5% growth. Improvements on the pricing side have helped drive up profitability (chart 2), but most of the outperformanceremains concentrated in certain upstream energy related industries (e.g.petrol, chemicals)andthose related to the Al push (e.g. non-ferrous metals, computer and electronics) (chart 3). By sector, higher energy prices amidst the Middle East conflict have lifted profits in petroleumprocessing and chemical products. However, there are sig