The data released for May suggest that GDP growth remains stuck below 8%, and could possibly ease to 7.6% y/y in Q2. However, the data does not suggest that the Chinese economy has entered a new phase of severe deceleration. Hence, we are unlikely to see any easing from the Chinese government, albeit an unexpected drop in inflation in May gives the Chinese government room to respond if needed.
We still expect to see a slight improvement in growth in H2 13, but downside risk continues to dominate. We expect exports to be a stabilising force in H2 13. The biggest risk is a substantial negative impact on investment demand, in the wake of regulatory tightening targeting local government debt and shadow financing.
May's foreign trade and credit data have been distorted by the government's curb on speculative capital inflows and arbitrage between the offshore and onshore foreign exchange markets. The curbs appear to have eased speculative capital inflows. This should ease appreciation pressure on CNY.
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China: Growth Subdued But Not Soft Enough To Force Easing
Published 06/10/2013, 08:35 AM
Updated 05/14/2017, 06:45 AM
China: Growth Subdued But Not Soft Enough To Force Easing
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