China: green shoots ahoy?

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It’s been a while since the dreaded “green shoots” phrase was last rolled out. And we can’t claim credit for it this time. Instead, it is the China economics team at Barclays, in one of their many reports looking at the weekend’s data points.

And, to be fair, there is some cause for a spot of optimism.

The Barclays report was referring specifically to one set of data covering fixed asset investment in May. The headline FAI growth figure of 20.1 per cent y-o-y was pretty much as expected, buoyed by solid infrastructure investment.

Other indicators for the Chinese economy in May were similarly not terrible. Inflation dropped to 3 per cent, while both imports and exports bounced back.

In one of the Barclays’ other reports, it summed it up the less-than-disastrous month of economic activity neatly:

Overall, China’s May data, released over the weekend, should bring some relief to jittery markets: the Chinese economy is slowing but not crashing.

Monday brought two other pieces of news likely to ease those nerves. First, Hong Kong property company Wharf decided to snap up a stake in Greentown – a mainland Chinese home builder. Reuters offers a clue as to why the move is a bit of a surprise:

Hangzhou-based Greentown, which had a land bank of 24.7 million square metres at the end of last year, held the heaviest debt load among major Chinese developers at the end of 2011. It has been selling off projects to pay down its borrowings.

The market responded by snapping up Greentown shares too, pushing the stock higher by more than 30 per cent. The broader implication is that someone who knows a thing or two about property in Asia is ready to dive into the Chinese market, a view echoed by the Capital Land chief executive in an FT video interview last week.

The other spot of good news is the May loan data. China’s banks lent Rmb793.2bn in May, up from Rmb681.8bn in April. A Bloomberg poll put the consensus estimate at Rmb700bn, though analyst estimates ranged all the way up to Rmb850bn. But the fact that the number is significantly higher month-on-month suggests activity somewhere is picking up.

Taken together, there’s some reason for hope. But don’t get too excited, says Citi:

The set of macro data in May indicates that the growth momentum had stabilized but at a low level. Q2 growth may be falling to the 7.0-7.5% range unless there is a significant lift in June.

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