China: Concerning are the latest set of economic data - Rabobank

Michael Every, Head of Financial Markets Research at Rabobank, suggests that just as concerning are the latest set of Chinese economic data which show growth is already slowing again: M2 slowed to 12.8% y-o-y; industrial production to 6.0% y-o-y; retail sales to 10.1% y-o-y, and fixed investment growth to 10.5% y-o-y.

Key Quotes

“In short, the USD1 trillion borrowed in Q1 is wearing off already. Moreover, aggregate financing (the broadest new debt measure) printed at CNY751bn (‘just’ USD115bn in one month), less than a third of the pace added on average each month in Q1. That’s a much more sustainable pace of borrowing, but obviously bodes ill for Chinese growth ahead. Meanwhile, China’s bubble du jour in commodities continues to burst as regulations are tightened, and so retail investors are finding that yet another way to make quick 25% returns turns out to be a way to make equivalent losses too.

With the half-life on both China’s stimulus packages and its bubbles continuing to shorten, how long until we see greater movement in the currency again, especially with USD on an upswing? The EU seem to be acting in advance on that front with the EU parliament’s decision on Friday to reject accepting China as a market economy: the vote is non-binding but at 546 - 28, the message being sent ahead of the European Commission’s final decision later in 2016 is clear.”