China’s central bank maintained its forecast for the country’s economic growth at 6.8% for 2016, but it has raised its estimates for consumer inflation and fixed-asset investment growth as the May trade data suggested an improvement after the very weak April performance.
In its mid – year economic research work paper, the People’s Bank of China released yesterday revealed the central bank now thinks inflation will rise to 2.4% this year (the May data are out later today) after the initial forecast late last year estimated it at 1.7%. The paper said positive impacts from accelerated growth in property and infrastructure investment will largely be offset by the negative impact of the slowing expansion of the trade surplus.
The People’s Bank that the government’s push to reduce debt levels and overcapacity could increase bond default risks and make it more difficult for companies to raise funds.
And ahead of next week’s meeting of the US Fed, the PBOC, said the pace of US interest rate rises would affect global capital flows and emerging market currencies, but it did not mention the yuan.
The central bank also raised its forecast for full-year fixed-asset investment grow to 11% from 10.8% which reflects the higher investment in housing construction.
For the first five months of the year, annual exports were down 7.3% while imports were down 10.3%.
The May trade data reflected that improvement to some extent. The fall in Chinese imports last month was at the slowest pace since 2014, suggesting that the higher spending in housing and infrastructure was having an impact on demand.
Iron ore wasn’t one of those – its price fell 24% in May from April, even though Australia shipped a near record amount of the mineral in the month
But the rebound in commodity prices (especially oil) also helped buoy imports which fell by 0.4% in US dollar value terms last month, less than the 10.9% slide in April, according to figures from the Chinese customs administration.
Exports from China fell 4.1% in May from the same month in 2015 in US dollar terms last month, intensifying from an annualised contraction of 1.8% in April.
That saw China’s trade surplus rise to $US49.98 billion from April’s $US45.56 billion in April. But it was sharply lower than in May 2015 when it reached $US57.22 billion.
Meanwhile the customs data showed China’s renminbi-denominated exports grew 1.2% year on year in May as imports purchased using the Chinese currency grew 5.1%. Imports fell 2.5%.
The Financial Times though pointed out that one oddity in the data was an impossibly large 242.6% surge in imports from Hong Kong in the month. In fact it seems to be the highest growth rate since records started back in 1994 and totally unrelated to the amount of actual trade between the region and the mainland.
Trade with the European Union, China’s largest trading partner, climbed 2% year on year in the first five months of this year; while trade with the US and ASEAN, China’s second- and third-largest trading partners, fell 5.2%t and 1.6%, respectively. And trade with Japan, China’s fifth largest trading partner, eased 0.3%.
