CNBC's The China Connection newsletter: Waiting for AI to lift the whole market

A real estate project is under construction in Yantai City, Shandong Province, China, on May 29, 2026. Nurphoto | Nurphoto | Getty Images Hi, this is Evelyn, writing to you from Beijing. Welcome to the latest edition of The China Connection — a snapshot of what I'm seeing and hearing from local businesses. As AI captures more and more headlines, what are they missing about the rest of the economy? The big story Since the pandemic, the China story has diverged as tech advances grab attention, while traditional industries fade. Now that's showing up in official economic data. Artificial intelligence-related chip demand is driving exports and some inflation . But the real estate slump has worsened, while consumers still aren't spending that much. As investors await retail sales and investment figures for May, due out at 10 a.m. local time Tuesday, Standard Bank's Jeremy Stevens asks when the GDP downgrades will start. "We don't see a credible path to 4.6% in Q2:26," he said in a note Wednesday. "Instead, a test of the 4% threshold in Q2:26 seems the natural landing zone." "The Iran war has smashed manufacturing margins already squeezed to five-year lows, dented consumer confidence, and fortified arguments favoring precautionary cash-hoarding," he said. Stevens also cautioned about rising pressure on exports due to growing import costs and potentially weaker demand abroad. …