Growth,StabilityPersistamidConcerns
May2018sawyetanothermonthofstableeconomicgrowthinChina.MaintainingthisdegreeofstabilityoveranextendedperiodhasbeenoneofthefundamentalenablersforChina鈥檚economicsuccess.TheChineseeconomyremainedresilientinMaydespitethesignificantconcernsaroundgrowingcorporatedebt.TherehaslongbeenstrongconsensusthatChina鈥檚corporatedebttoGDPratioisunsustainablyhigh,andadeleveragingoftherealeconomyisnowseenasinevitable.Thiswouldsignificantlyhampergrowthasstabilizingthiswouldnecessitateareductioninbusinessinvestmentgrowth.
KeyEconomicIndicators
China鈥檚producerpriceindexachievedafourmonthhighafterrisingforasecondconsecutivemonthinMay,rising4.1percentfromayearearlierandgrowing0.4percentfromthepreviousmonth.Thisgrowth,whichoutperformedanalysts鈥檖redictions,hasprimarilybeendrivenbyhighercommodityprices,includinga7.4percentincreaseinrawmaterialpricesunderpinnedbystrongdemandfromthesteelsector.Consumerpriceindex(CPI)rose1.8percentyearonyearbutdeclined0.2percentfromthepreviousmonth.Withfoodpricesremainingfairlysteady,China鈥檚CPIisstable,themainthreattothisbeingthetradetensionsbetweenChinaandtheU.S.,whichtargetsagriculturalproducts.
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