China Center Data Flash: Steady growth outlook gives headroom for continued efforts to slow credit growth

Data Flash is a brief interpretive summary of China’s official monthly economic data release.

• With a policy stance clearly focused on financial risk containment, growth continues to taper off in monetary expansion and housing sales. There are no signals of a change in this policy trajectory, so the tapering off should continue in the near term. In response, monetary growth hit a record low in May.
• Industrial Production (IP) and Fixed Asset Investment (FAI) growth both held steady in May, but there are signals of increasing downside pressure on both metrics. Investment growth in real estate development started to decrease in May. And credit access for small and medium-sized firms is likely to be affected by the monetary tightening measures, which is reducing the liquidity of smaller banks that tend to lend to smaller firms.
• Growth in retail sales remains resilient, despite reduced purchasing incentives (e.g., for autos). Low inflation and rising consumer confidence should continue to buoy private consumption.
• Though lower than Q1, export growth in the first five months improved markedly from the same period last year. Modest economic recovery in the US and Europe is likely to continue, and this will support China’s exports in the short term.