Beyond the headlines: what real-time sentiment says about China’s 2025 outlook

by Belle

China’s growth targets may be back on track, but investors know the headline story is rarely the whole picture. Beneath reassuring prints, our real-time China Macro Sentiment Indices point to an uneven recovery: property remains a drag, consumption looks policy-led, manufacturing is resilient yet reliant on support, and price pressures are subdued. For macro and markets desks, the question is not whether growth lands near target – but what quality of growth we’re actually getting, and how that feeds into risk and opportunity across asset classes.

Why headline stability can mislead

Official data is invaluable, yet it’s backward-looking, subject to revisions, and often smoothed by policy. Sentiment, by contrast, captures how households, firms and investors are reacting now – before behaviour fully shows up in the prints. When we observe sentiment shifts persisting across sectors and regions, it can act as a practical lead indicator for demand, margins and funding conditions.

What our indices measure

Permutable AI’s China Macro Sentiment Indices synthesise thousands of structured and unstructured signals into sector- and theme-level momentum scores. We track how narratives evolve in public disclosures, market commentary and broader news coverage, then map those shifts to macro themes: growth, inflation/deflation, property, external demand and more. The resulting indices provide an intuitive “pulse” that complements traditional data and helps explain divergences when the numbers look steady but confidence does not.

A two-speed economy in the data

  • Property: Confidence in housing remains weak. Sentiment around new starts, completions and developer balance sheets points to ongoing caution among buyers and lenders alike. Even where sales improve month-to-month, the tone remains fragile – something risk managers should factor into credit and equity exposures tied to construction and home-related consumption.
  • Manufacturing: Output holds up better, but our indices show softening conviction where export-reliant sectors face tariff or supply-chain risk. Policy support and on-shoring of strategic industries cushion the downside, yet overcapacity concerns linger in several sub-sectors. For equity and credit investors, that implies greater dispersion: quality names with pricing power or policy alignment fare better than marginal producers squeezed by weak end demand.
  • Consumption: Retail sentiment lifts when incentives are in place, but households still appear cautious. That pattern is consistent with a “stop-start” rhythm where targeted measures produce short bursts without establishing a durable trend. Consumer-facing names may see intermittent strength; the broader signal argues for selectivity.
  • External demand: Export-linked sentiment remains uneven. Re-routing and friend-shoring dynamics are still in motion, and our readings pick up the effects in sectors where orders are volatile or margins are pressured by compliance and logistics costs.
  • Prices: The deflation narrative hasn’t disappeared. While short-term rebounds occur, our price-pressure indicators suggest that excess capacity and restrained demand continue to weigh, keeping an eye on cash-flow resilience, inventory strategy and discounting.

Why sentiment matters for positioning

For institutional investors, the practical value is in timing and sizing exposures. When market sentiment persistently diverges from the official story, it often precedes shifts in earnings guidance, capital expenditure plans and credit conditions. Three examples:

  • Rates & FX: Re-emerging deflation risk and cautious domestic demand can support a relative-value stance in rates or FX pairs sensitive to China’s growth mix and policy path.

  • Credit: Property-adjacent credits and suppliers are more sensitive to negative sentiment shocks; banks with higher real-estate exposure warrant closer monitoring of funding conditions and NPL expectations.

  • Commodities: Our indices help separate geopolitics-driven headline volatility from genuine supply-demand changes. For energy and industrial metals, that distinction is the difference between chasing noise and holding conviction.

Method in brief

Our approach blends natural-language processing with domain expertise. We classify sources by reliability and context, score directional changes in tone and uncertainty, and apply filters to reduce event-driven noise. The emphasis is on consistency over theatrics: a signal only matters if it’s persistent, broad-based and aligned with plausible economic channels. That design helps the indices function as early warning systems rather than just narrative trackers.

What to watch next
Policy will remain pivotal. Measures that nudge housing stabilisation and household confidence can improve the growth “mix”, but excess capacity and global trade frictions won’t vanish overnight. From an asset-allocation perspective, we see three ongoing themes:

  • Quality over quantity in manufacturing as policy-aligned, higher-margin producers outperform volume-driven peers.

  • Selective consumption with pockets of strength around targeted incentives, balanced against household caution.

  • Risk dispersion across credits and equities tied to property and exports, requiring tighter position management and more granular hedging.

Bottom line
China may meet its growth goal, but the texture of that growth matters. Our sentiment data suggests a recovery that’s steady in the aggregate yet fragile in composition. For investors, that argues for careful selection, active risk controls and a willingness to lean on forward-looking indicators when the backward-looking data looks deceptively calm.

China may hit its growth target, but our real-time sentiment indices show uneven momentum weak property, policy-led demand and subdued prices – insights for risk and positioning.