The publication of the last batch of Chinese hard data painted a better-than-expected picture of the country’s economic situation. Investors have increasingly worried that slowing growth in the world second largest economy would have a significant global impact. In addition, the trade war unleashed by Donald Trump more than a year was expected to worsen the situation. However, after a rough start into the year, data seems to suggest that the worse over. Retail sales accelerated to 8.7%y/y in March versus forecast of 8.4% and 8.2% in December (no data in January and February due to New Year holidays). Industrial production surprised the most as it jumped 8.5%y/y last month, while market participants expected an increase of 5.9%. Globally, the economic activity stabilised somewhat in the first quarter as GDP growth printed at 6.4%y/y, beating estimates of 6.3%.
Overall, we do not believe that those impressive figures indicate that the Chinese economy is out of the wood. At best, it suggests a slower pace of deceleration. The lack of reaction in both the FX and the equity market indicate that it is not much to celebrate: the yuan barely appreciated against the greenback woth USD/CNY sliding 0.30% to 6.69, while the CSI 300 edged up by 0.04%. On the other hand, it can be seen as a hard blow to the US administration that has been calming for months that the trade war hurting China badly. We do not believe those data are game changer but it could definitely put US negotiators in a weaker position.
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