China: Policy changes expected in response to weak May data - Nomura

Sandeep Kanihama FXStreet Contributor

Analysts at Nomura suggest that China is now feeling the pinch from deleveraging, and some policy changes are expected from Beijing.

Key Quotes

“Although the year-on-year growth rates of industrial production, investment and retail sales all slowed in May (from April) and surprised the markets on the downside, these readings are in line with our views that end demand has been getting increasingly weaker due to the rapidly shrinking credit supply from the shadow banking sector, and the rebound in IP growth in April was just a temporary blip on suppressed production in the winter.”

“We do believe deleveraging is needed for China, but we also know that Beijing cares a lot about growth stability, and there might be a more sustainable way to deleverage. We expect Beijing to introduce more moderate easing measures in coming months, and view the likelihood of an RRR cut in the next two months as quite high.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

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