China’s economic moderation continues in May

June 14, 2017

HONG KONG - After registering a stronger-than-expected performance in Q1, the Chinese economy continued its moderation in May, reflected in a batch of important activity indicators reported today. BBVA Bank says growth moderation is partly due to the authorities’ monetary prudence targetted at risky shadow banking and the overheating property market.

“Risks from corporate and local government debt overhang, capital outflow and shadow banking still exist,” BBVA says. “Thus, we maintain our growth projection of 6.3% for 2017 (vs the official target of around 6.5%) .

“China’s FAI dropped to 8.6% ytd y/y from the previous month reading of 8.9% ytd y/y (consensus: 8.8% y/y). Private investment, which is our previous concern of the growth sustainability, also dropped from 6.9% ytd y/y previously to 6.8% ytd y/y.

“In addition, industrial production maintained the comparatively low growth rate of 6.5% y/y as in April (consensus: 6.4% y/y) and retail sales also remained at 10.7% y/y as of the previous month (consensus: 10.7% y/y), reflecting the recent sluggish auto sales.” (ATI).