China’s Economy at a Glance – 12 June 2015

China’s partial economic indicators broadly stable in May, but weak enough for the People’s Bank of China (PBoC). In June, PBoC cut their economic growth forecast for 2015 from 7.1% to 7.0%. For now, our economic forecasts remain unchanged.

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China’s partial economic indicators broadly stable in May, but weak enough for PBoC forecast cuts

  • In June, the People’s Bank of China (PBoC) cut their economic growth forecast for 2015 from 7.1% to 7.0%. For now, our economic forecasts remain unchanged (7.1% in 2015, 6.9% in 2016) but we note the downside risk presented by any major correction in equities markets.
  • China recorded another month of weak industrial production in May – with output rising by 6.1% yoy (from 5.9% in April). This level is only marginally stronger than the six year low of 5.6% recorded in March, but was in line with market expectations.
  • Fixed asset investment recorded slightly stronger growth in May, at 10.0% yoy (up from 9.4% in April – which was the slowest rate of growth since December 2001). That said, lower costs for key inputs (including steel) have supported stronger levels of real investment.
  • China’s trade surplus expanded further in May, rising to US$59.5 billion (from US$34.1 billion in April). This was only marginally below the record level recorded in February 2015 (US$60.6 billion). The increase reflected a more modest decline in exports (-2.5% yoy) than imports (-18%yoy).
  • Capital outflows have continued in early 2015 – with the total flow in the March quarter rising to US$159 billion (from US$97 billion in Q4 2014). As we have previously noted, this outflow includes ‘hot money’, reflecting the unwinding of the carry trade – however some is likely to be officially sanctioned outward foreign investment.

For further details, please see the attached document: