2016.05.1605:18:00UTC+00China’s Economic Activity Moderates in April Following Strong Rebound in March

China’s economic activities’ monthly data was released recently. Activities moderated last month after recovering strongly in March. Growth was driven by the property sector and infrastructure spending. The consumption trend and shrinking of the ferrous metal industry are in line with the Chinese government’s intentions for industrial policy and economic rebalancing. But there should be caution of property prices rising too much and a possible overleveraging in real estate, which is a major worry of top officials, noted ANZ in a research report.

The Chinese central bank is likely to be less aggressive in mulling easing of monetary policy and will undertake a targeted approach. The PBoC is expected to lower reserve requirement ration just one time in 2016, added ANZ.

China’s manufacturing eased; however, industry gave a mixed performance. The country’s industrial production growth fell to 6% y/y in April. On a month-on-month basis, the industrial output grew 0.47%, as compared with March’s growth of 0.63%. Ferrous metal, general equipment and mining growth rates fell by around three percentage points last month. Meanwhile, growth rates of non-ferrous metals, food and automobiles accelerated at a faster rate.

Investment expanded at a slower rate, whereas infrastructure spending continued to be strong. Fixed asset investment growth fell slightly to 10.5% in the January to April 2016 period from Q1 2016’s 10.7% growth. On a sequential basis, the growth fell to 0.72% from March’s 0.86%. However, infrastructure investment expanded solidly by 19% y/y, accounting for 30% of the total growth.

Meanwhile, property sector continued to underpin inventory reduction in April. Investment in real estate grew 7.2% in the January to April period, as compared with 6.2% growth recorded in Q1 2016. This implies that activities in last month were higher than the period average, added ANZ. Retail sales growth dropped 0.2 ppt to 10.1% in April; however, the sequential growth rate came in at 0.8%.