China: Activity data add to impression of growth moderation
The bank expects the emerging growth moderation to be limited, with the Chinese leadership standing ready to support the economy in case of need. A calm environment will be of the essence during the important power change in autumn. For this reason, interest rates could stop rising and the CNY could start weakening slightly during the next months, writes Susan Joho, Economist, Julius Baer
Today’s activity data for April showed receding growth momentum, with industrial production growth slowing to 6.5 per cent y/y and retail sales and fixed asset investment growth a tad lower at 10.7 and 8.9 per cent respectively. Accordingly, economic activity is moderating after an unexpectedly strong first quarter. This is due to a receding fiscal impulse and a tightening to calm the real estate and shadow banking sectors. Nevertheless, the economy remains supported by government investments, as both credit data and the fixed asset investment into state-owned enterprises suggest. We believe that China will maintain this support and stand ready to inject more funds should growth falter more than expected.