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A mixed bag of Chinese data out in May didn’t help fears of a Chinese hard landing. But Barclays analyst Jian Chang and her team write that there are signs that China’s growth is “bottoming, but not yet out”.Many supportive measures have been rolled out since May, with the the National Development and Reform Commission (NDRC) accelerating the pace of project approvals and the announcement of fiscal subsidies to boost consumption, not to mention the RRR, deposit, and interest rate cuts.
“Therefore, we continue to look for the growth to bottom in the current quarter, and expect the policy easing measures to gradually impact the economy,” writes Chang. Some of these signs of stabilisation or bottoming growth were evident in May data:
- Growth in infrastructure investment picked up in power, water conservancy, transportation. Year-to-date (Ytd) investment recovering 4.6 per cent year-over-year (YoY) in May, from 3.3 per cent the previous month, and 1.8 per cent in March.
- Manufacturing investment increased to 24.5 per cent YoY Ytd in May, from 24.4 per cent the previous month.
- Property investment also held up at 18.5 per cent YoY in May, marginally lower from 18.7 per cent in April, but with a rebound in residential investment which jumped to 12.8 per cent, from 4 per cent in April.
- Auto sales posted its first Ytd growth in May.
- Credit structure, a crucial indicator also showed some improvement in May, with new loans rising to 793 billion yuan in May, from 682 billion yuan in April.
For now Chang and her team have revised down their Q2 GDP projections to 7.5 per cent YoY, from 7.7 per cent. They have however maintained their full-year forecast of 8.1 per cent growth. They do expect the central bank to lower benchmark interest rate by 25 basis points and the reserve requirement ratio (RRR) by 100 basis points because of the risk of capital outflow.
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